Efficient solutions for conservative investors
Founded in 2016
350+ HNW clients trust us with their investments
Locations in the UK, Kazakhstan, Montenegro, Cyprus and the Cayman Islands
Why We operate Investment Funds
Transparency
Security
Scale
Flexibility
Tax benefits
Investment funds are controlled by an external agent – an administrator who keeps records of the value of investments and verifies that managers comply with the investment declaration. Once a year, the funds are audited by an independent auditor. The results of the fund's work are evident to the general public, they cannot be hidden, embellished, forged, presented partially, etc.
Fund managers activity is limited to investment transactions on behalf of the fund; they can neither withdraw funds from the fund nor influence the decision of investors to transfer to or withdraw their funds from the fund.
A fund that accumulates the investments of many investors is itself a big investor. Brokers, banks, exchanges and other providers accept funds at significantly more favourable conditions than those for private investors. A much wider arsenal of investment opportunities is available to funds.
Thanks to the scale, investment funds can build a much more flexible and diversified strategy than individual investors; in particular, investment funds have the opportunity to make investments in securities or projects where the minimum "entrance ticket" is large, while still deploying only a small part of its portfolio in that investment. Similar to the case with the providers, funds receive favourable investment conditions from the issuers, while the conditions for smaller investors may be significantly worse.
Most countries tax realised investment income – the amounts of capital gains realised and interest and dividends received. The owner of the fund's shares does not have to pay income taxes until the redemption of his shares - this postpones the payment of taxes for years. In jurisdictions with preferential capital gains taxation, owners of the fund's shares significantly reduce their tax burden, since dividend and interest incomes on investments in the fund are incorporated into the increase in the value of the fund's shares.
How Funds Work
The investment fund is serviced by a number of providers that ensure the safety of clients' investments and correct accounting of management results.
Structure of the investment fund
Structure Diagram
The Process of subscribing to the shares of the investment fund
Process scheme
Cash flow chart
Cash flow chart
Structure of the investment fund
1
Purchase, redemption and keeping records of the fund's shares
- 1. To subscribe to the shares of the investment fund, the investor must pass the document verification procedure (the so-called "Know Your Client" and "Anti-Money Laundering") with the administrator of the investment fund. Subsequently, the administrator keeps records of the investor's investments and is responsible for the relationships of the fund with the investor. In particular, it provides the investors with reports on the results of management throughout the entire period of investor's investment life in the fund.
- 2. Upon successful completion of the document verification procedures, the investor transfers funds to the current account of the investment fund with the bank for the purchase of the fund's shares.
- 3. Subscription to the shares of the investment fund is carried out by the investment fund on the basis of the subscription agreement.
- 4. The administrator provides his services to the investment fund on the basis of an administrative services agreement. Under this agreement, the administrator verifies the documents, maintains a register of investors-shareholders and maintains the accounting for the shares of the investment fund, keeps records of invested funds, calculates the net asset value of the fund’s shares and provides reports to the fund’s clients on the results of management.
- 5. The bank provides settlement services for the investment fund on the basis of an agreement on the provision of banking services; the broker provides brokerage services for the investment fund based on the brokerage services agreement. Investors funds shall be initially transferred to the fund’s bank account, and subsequently the administrator transfers them to the fund's broker account to perform investment operations. In case of redemptions from the fund, cash for such redemptions is transferred from the brokerage account of the fund to the bank account of the fund and subsequently transferred to the bank account of the investor.
2
Fund management
- 1. The management company operates on the basis of the investment management agreement between the management company and the investment fund. It develops an investment strategy within the limits set out in the fund's founding documents, monitors its observance in parallel with the administrator, and makes and executes investment decisions on behalf of the fund.
- 2. The management company may engage investment advisors to manage the portfolio of the investment fund and transfer part of the responsibilities to such advisors on the basis of a trilateral investment advisory agreement between the investment fund, the management company and the investment advisor.
- 3. The broker, operating on the basis of brokerage service agreements, carries out the purchase and sale of assets on behalf of the fund; the broker also keeps track of and provides the safekeeping of assets.
3
Audit
- 1. The broker, operating on the basis of brokerage service agreements, carries out the purchase and sale of assets on behalf of the fund; the broker also keeps track of and provides the safekeeping of assets.
- 2. The auditor, acting on the basis of an agreement between the investment fund and the auditor, checks the accuracy of the calculation of the net asset value and financial results for the reporting period, compliance with the international accounting standards, as well as the compliance with the investment strategy. The audit report is available to all investors of the fund.
4
Legal support
- The legal counsel advises on legal matters related to the activities of the fund, based on the service agreement between the investment fund and the legal counsel.
The Process of subscribing to the shares of the investment fund
Investing in the Investment Fund directly by an individual or a company
This type of investment requires time primarily for going through the administrator's checks. It is advisable to start the process no later than 1 month before the Subscription date. The speed of the process directly depends on how quickly the investor will be able to prepare the documents confirming the origin of the funds. The diagram shows the approximate time horizon of the process.
-
T-28
The investor fills in the investor questionnaire.
-
T-27
The investor receives the list of questions and documents required for the compliance process.
-
T-25
The receipt of the documents from the investor required for the compliance process.
-
T-15
The investor profile is created and transferred to the administrator.
-
T-13
Internal compliance by the administrator: reviewing the case and the investor documentation; requesting additional documentation (if necessary); finalising the decision with regard to the investor (on average 10 calendar days from the time of the receipt of the documents).
-
T-3
Transfer of documentation to the administrator (3 working days before the subscription date) and transfer of the funds to the investment fund.
-
T0
The date of subscription: determining the price and issuing shares; entering the new investor into the register.
-
T+10
The administrator issues the subscription confirmation and sends it to the investor.
Investing in the Investment Fund through a Broker or Bank in low-risk jurisdictions
In the case of investing through the investor's account with a broker or a bank based in a low-risk jurisdiction (a jurisdiction where financial institutions can certify investor's compliance with the administrator's requirements), the investor does need to go through the verification procedure with the administrator. The investment process in this case is significantly reduced and simplified. The Investor will however pay commissions to the bank/broker for buying and selling the shares and for holding the shares of the fund in the name of the investor. It is advisable to start the process no later than 1 week before the subscription day.
-
T-5
The investor orders the bank/broker to purchase the shares of the investment fund (no later than 5 days before the subscription day).
-
T-5 — T-0
Internal procedures of the bank/broker for the purchase of the shares of the fund.
-
T-5 — T-0
Exchange of data with the administrator and receipt of the confirmation that the transaction is possible.
-
T-0
Subscription date: determining the value of the shares and issuing the shares at the time of subscription.
-
T+10
The administrator issues the subscription confirmation and transfers to the investor.
Cash flow chart
Principles of Investment
Individual idea generation, collective decision making, proprietary trading testing
Limiting risk
Continuous monitoring
Smart diversification
Everything is relative
Luck or advantage
Game theory, not accounting
Analyse emotions, not experience them
The most important task of each partner and employee is to generate investment ideas – whether it is finding an interesting asset class, product or a new clustering parameter in a mathematical strategy. The idea is brought before the investment committee, whose prime objective is to find a reason to reject the idea. Once the managers make sure that they cannot find such a reason, the managers either buy the securities, reflecting the idea, into the portfolio of the fund or add a parameter into the quantitative strategy. If the idea concerns creating a new product, the idea is first tested with partners’ funds within a proprietary account.
We manage primarily conservative products. We could implement ideas that improve performance coefficients of our funds while making them riskier, but we consciously refuse to do so. If we eventually decide to make high-risk products, we will "label" them accordingly.
Any investment requires continuous monitoring – the situation can change unpredictably and very quickly. Therefore, our investment analysis process begins at the stage of making the investment decision and continues throughout the period of holding the investment in our portfolio.
We experienced making serious mistakes. We appreciate that there are no absolutely accurate solutions and therefore any idea should be allocated a small place in the portfolio so that a potential error does not have a significant impact on the portfolio as a whole. And diversification by itself is not enough – to create portfolios, we also use an assessment of the relationship between the behaviours of various investments in a negative scenario. This assessment includes both correlation and covariance analysis, as well as qualitative research. We only accept an investment idea into the portfolio when it reduces portfolio volatility, and the "worst-case scenario" improves as a result.
In investing, there are no accurate forecasts. A huge amount of "noise" in the form of market data, economic statistics and actions of market participants makes it easy to find false dependencies and makes it extremely difficult to find real patterns. The situation is complicated by two more factors. First, markets and economies are constantly evolving, so that even true dependencies change over time; second, most economic processes are chaotic, that is, small influences (for example, an irrational decision of a regulator or random media activity) can cause huge consequences. Therefore, we do not (almost) use forecasting as the basis for the formation of the investment portfolio.
At any given time, there is a significant number of successful investors: some succeed by pure luck, some because of skills and specific advantages. However, investing “physically” cannot bring all participants a return above the long-term growth of global GDP. If someone earns more, then some investor suffers losses. Therefore, we do not use "simple" solutions; we look for ideas that are derived from our sustainable advantage (informational, scientific or technical), and for the teams with such an advantage. In the absence of such advantages, the best solution is to invest in a wide market, and we sometimes do so.
The success of an investment ultimately depends on whether the market will pay more for it in the future than what is expected today. Hence, the task of the manager is to understand what other market players will think about the investment idea in the future. The decisions of a good manager, therefore, should not be based on an objective truth (including mathematical truth), but on an accurate assessment of the future actions of other players. That is why we not only pay enough attention to quantitative information, but also focus on its interpretation by market participants. There is a popular saying that "Markets can be irrational far longer than you can stay solvent." We believe that markets are not rational at all.
Emotions drive investors to make a lot of mistakes. The desire to close positions in securities that brought profit, and to maintain unprofitable ones; seeing false patterns, which results in believing in technical analysis; self-isolating from the information flow by accepting only those facts that confirm the correctness of the investment actions taken previously – are just a few of the mistakes caused by the emotions of the investor. We strive to protect ourselves from the influence of such emotions, but not to ignore them – we analyse emotions and irrational impulses, understanding that they will be experienced by a large number of investors and many of them will not be able to abstract their actions from their emotional state.
Investment Process
The investment process – from the formation of the fund's strategy to the monitoring of instruments in its portfolio – is a carefully coordinated work of managers, analysts and members of the investment committee.
Investment Process
Investment scheme
Investment Process
1
Defining the strategy
- 1. Selecting an investment strategy.
- 2. Defining the set of instruments.
- 3. Defining the style of investment (tactical or strategic).
2
Identifying the instruments
- 1. Forming the set of financial instruments meeting the fund’s investment criteria: geography, industry, credit quality, liquidity, entry requirements, transparency, and the reliability of asset valuation.
- 2. Selecting the most promising securities.
3
Tactical of investment. Analysis
- 1. Creating transaction models for each specific asset class and each specific asset.
- 2. Statistical verification of the models.
- 3. Working through a specific case in practice.
4
Approval by the investment committee
- 1. Unanimous approval by the members of the investment committee of the proposed transactions, as acceptable and attractive, individually and within the framework of the portfolio of the investment fund as a whole.
- 2. If any additional questions emerge at any stage of the analysis, additional analysis is conducted and the idea is reviewed.
5
Selecting the allocation parameters
- 1. Selecting allocation parameters for different asset classes, while accounting for the market conditions and the expectations of the managers for the returns on and volatility of the assets.
6
Tactical of investment
- 1. Creating transaction models for each specific asset class and each specific asset.
- 2. Statistical verification of the models.
- 3. Working through a specific case in practice.
7
Analysis
- 1. Unanimous approval by the members of the investment committee of the proposed transactions, as acceptable and attractive, individually and within the framework of the portfolio of the investment fund as a whole.
- 2. If any additional questions emerge at any stage of the analysis, additional analysis is conducted and the idea is reviewed
8
Allocation revision
- 1. Determining the new allocation for the various instruments while taking into the account the newly approved and executed transactions.
- 2. Reviewing the allocation position while taking into account the changes in the market conditions
9
Monitoring
- 1. Structural changes in the markets that can lead to a fundamental shift in the prices.
- 2. Efficiency of the portfolio allocation.
- 3. Attractiveness of the ratio of return to risk for the instruments of the portfolio.
- 4. Liquidity and the level of risk in the portfolio.
