"Intelligence is the ability to adapt to change." Stephen Hawking
Three underlying philosophies that differentiate us:
- Our investment strategy is unique; it's a combination of various investment ideologies including fundamental, technical and quantitative;
- Our risk management approach helps us to achieve our capital preservation objective more effectively than traditional methods; and
- Our emphasis is on aligning manager's interests with investors'.
Unique Investment Strategy
Our name 'Zentrum' is derived from an ancient German word meaning 'centre', 'central point' or 'hub'. At Zentrum, we pride ourselves on our ability to act as a centre or hub where different investment ideologies can be combined and cultivated. These investment ideologies include but not limited to fundamental, technical and quantitative. We seek to have an open mind and to apply these different ideologies to our unique approach that is apt for the Asian markets. In our stock selection process, we use a fundamental-based approach but supported by technical analysis. We also use a quantitative approach to manage our entry and exit as well as the overall portfolio exposure. The market is constantly evolving and the ability to adapt is the key to investment survival. We believe our approach will help us to adapt to different market conditions.
Rigorous Risk Management
Given the general increasing volatility in the financial markets, a traditional fixed asset allocation cannot achieve our capital preservation objective. As an example, if we have a 60% fixed allocation in equity, a 30% annual decline in the equity market would imply an 18% annual decline in the portfolio – this would result in a significant drop in the NAV of the fund and our capital preservation objective cannot be met.
To solve this problem, we need to design a proprietary risk management/asset allocation model that can optimize between the downside and upside of the portfolio simultaneously, i.e. how to maximize the upside given a fixed level of the downside risk. This can be achieved by using a dynamic model that allocates according to market conditions. At the same time, it needs to be systematic in order to avoid human errors and to provide objective analysis. Our proprietary risk management/asset allocation model has proven its ability to meet its objectives over market cycles.
Alignment of Interests
A significant portion of managers’ personal wealth is invested alongside our investors’ to ensure our interests are aligned with theirs. This reduces the possibility of us taking undue risk for the reason of obtaining an upside return.
Another important benefit of this approach is that we will limit the size of our funds in such a way that we think it is optimal for generating return. Size could often be the limiting factor in generating good return and this is especially true in Asia where markets are less liquid. In other words, we will not try to grow for the purpose of generating fees. We are consistently performance-focused and strive for high quality risk-adjusted return on our capital.