Global Return Asset Management, LLC, a New York-based investment management firm, recently released its June 2019 Update – a copy of which can be downloaded below. The company is focused on compounding capital with risk management. It is currently led by Elliot Trexler. As President and Chief Investment Officer, Trexler is in charge of overseeing investment analysis as well as portfolio and risk management. He also writes whitepapers about risk management, investment analysis, investing psychology, and ESG factors. Before joining Global Return, he worked for the CFA Society of New York as Vice Chairman of the Value Investing Group. As a Hedge Funds Strategy Group member and Forbes Magazine contributor, he develops guidelines about considering ESG factors when investing. During his career, he received several awards including “Hedge Fund Manager of the Year” from Wealth & Finance International and “Award for Excellence in Risk Analysis” and “Best Fundamental Growth Investor” from BarclayHedge.
In Global Return’s June 2019 commentary, Trexler reported that the firm generated a 6.6% return, which brought in a 27% year-to-date (YTD) return. He also discussed how their portfolio risk management strategy played a vital role in the company’s strong performance.
“Managing Portfolio Risk
Risk management is the core of our investment process. I’ve never understood why the investment industry separates “investment management” and “risk management”, as if these two are different. Investing is the act of purchasing risk and it’s this risk that generates a return. Think about it: Are there really riskless returns? Of-course not. Most people, including some of you, view us as investment managers, but in reality we’re risk managers.
Below is one example of how our risk management process enables us to consistently deliver the results we have and do this with minimal risk.
Prior to buying stock in a company I develop an “Investment Report”. This document has several sections and contains information about the company and its industry. One section is titled “IV” (which stands Intrinsic Value). In this section, I write-out “instructions” for how to manage an investment when it achieves its intrinsic value. Here, there are several options to pick from: do nothing, sell or reduce the position, add to the position, or reevaluate the position using our “Decision Facilitator”.
In April one of our holdings reached its intrinsic value and the IV called for re-evaluating the position using our Decision Facilitator. Many inputs are fed into the Decision Facilitator, including potential risks; these inputs are then probability-weighted and produce instructions for how to manage the position.
In this example, the Decision Facilitator indicated two reasons I should sell half the position to realize our open profits. First, the risk/reward ratio had shifted to near even odds. And second, a risk was looming that if ignited, and based on the probabilities, would cause the stock to decline. Consequently, we sold half the position for a 31% return. Two months later the stock declined 17%. The reason for the decline was that the risk we had previously evaluated came to fruition. Excluding the realized profit of 31%, we’re up 24% on the position.”
You can download a copy of Global Return Asset Management, LLC’s June 2019 Update here:
You can also see the list of our 2019 Q2 investor letters and download them on this page.