One of the advantages of being an independent RIA is having the ability to offer our clients broad level of flexibility and customization. Our Alpha strategies, using individual stocks, takes a unique approach to multi-management investing. Our highly selective process pulls from multiple teams of investment managers without having to incorporate their whole strategy. Our proprietary selection process specifies what we require from each manager to fit our objectives, not theirs. We can then build a portfolio that truly offers a select group of assets that fit within a carefully constructed portfolio.
Larger institutions will typically analyze managers through a size/style prism which essentially coerces managers to constrain their investable universe to a particular size (large caps vs. small caps) and/or style (“growth” vs. “value”). This “style box” construct, which has become ubiquitous in the industry, is a somewhat arbitrary and ambiguous classification system. Worse, it forces fund managers “in a box,” potentially limiting their scope and diluting their convictions. Furthermore, advisors need to combine multiple funds together for the sake of diversification and not putting all their client’s eggs in the same proverbial basket. This ‘fund of funds’ approach can result in a lack of transparency, illiquidity and even watered-down returns. You could end up buying into the same companies multiple times, be over-diversified by owning hundreds of securities at the aggregate level, or paying higher fees for the same or lower performance.
At Alpine Hill Advisors, we don’t buy other managers’ equity funds. We create our own proprietary equity portfolios without being forced to accept the bad with the good. We provide pin-point access to multiple, superior stock pickers, and leverage their convictions within an identified sector of interest. We believe sectors offer the most accurate framework for evaluating manager performance within our multi-manager construct. Classification of stocks by sector is much less fluid than by size and/or style, providing for a more robust analysis of their differences. In fact, through our experience and research, we have found that some managers actually do not find “value wherever it is” but rather derive their added value only from limited areas of the market. Our process enables us to better assess a manager’s stock picking abilities and to understand how the excess return was achieved. This allows us to determine whether it was the result of good stock picking or whether it was merely due to positive sector allocation.
Our proprietary selection process specifies what we require from each manager to fit our objectives, not theirs. We can then build a portfolio that truly offers a select group of assets that fit within a carefully constructed portfolio.
These third-party managers are thus seen as individual building blocks. Each building block, by its nature, is highly concentrated, replicating the manager’s stock selection from the identified sector of interest. When combined with other concentrated, sector-focused sleeves from managers with similarly demonstrated edges, adequate diversification is achieved within the resulting portfolio.
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Our Alpha Equity Strategy
Alpine Hill Advisors’ Alpha equity strategy offers several potential benefits, as summarized here:
- Risk Management: Investing in a variety of stocks across different sectors helps spread risk. Most importantly, our discriminating process helps us eliminate the human risk of having all of our eggs in one Manager basket. Our role as portfolio manager becomes more that of a risk manager, understanding the true exposures and risk of each building block to construct a balanced portfolio at the aggregate level and limit idiosyncratic risk.
- Access: We use only highly experienced, skilled and well-known managers, that all have long, established track record of managing equity portfolios. Further, we use only specific portions of what we feel are best suited for our strategy and where the manager has a clear, demonstrable expertise. It is a process that the average investor cannot access otherwise. We are also able to use the same methodology in securing institutional-level research for our clients at a lower price.
- Customization: Once we have identified managers with a discernible acumen in picking stocks in a specific sector, we can combine them together to create a diversified portfolio of US equities. We can go one step further by hand-picking specific holdings to customize a portfolio to an individual’s specific needs. This process gives us the freedom to better tailor your portfolio according to your investment goals.
- Flexibility: The popularity of multi-management rests mainly on its flexibility. With our unique approach, we can adjust your portfolio’s overall exposure towards different sectors or industries, macro themes or investment styles allowing us to tactically respond to changing market environments and trends. This flexibility can be especially advantageous during times of market uncertainty.
Our Alpha equity strategies require a higher level of active involvement compared to passive investing in index funds or exchange-traded funds (ETFs). This concentrated multi-manager approach provides a solution which maintains the benefits of multi-management, spreading contributions and risk, but without over-diversifying the aggregate portfolio or diluting the convictions of the underlying managers. This allows the solution to remain truly active and not fall into the pitfall of closet-indexing.
If you have comments or would like to discuss our innovative multi-manager approach, I would like to hear from you.
Thanks for reading.
Gregoire Painvin
Chief Investment Officer and Founding Partner
Alpine Hill Advisors
Gregoire Painvin is Chief Investment Officer of Alpine Hill Advisors, a Westport, CT Registered Investment Advisor firm. If you would like to contact the author, please e-mail him at gpainvin@alpinehilladvisors.com or call 720-794-5796.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor Alpine Hill Advisors LLC (“Alpine Hill”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Alpine Hill and its representatives are properly licensed or exempt from licensure. Please visit our website https://alpinehilladvisors.com for important disclosures.
