The Quest Difference
Quest believes that investors should be compensated for the risk they take. Most investment programs examine total return and total risk, where total risk is defined as the volatility of a set of returns and measured by standard deviation. While we believe this is a good start, we feel it does not go far enough in identifying and evaluating the different sources of risk and return. Specifically, the “total return, total risk” approach fails to distinguish between the components of risk and return generated by the market and those generated by the investment manager.
Our approach is different. By adapting a process pioneered by Raymond James®, we break down risk and return into their “active” and “market” components. This allows clients to attempt to control the level of active risk in any portfolio (the “risk budget”) and to measure the value added by the separate account or mutual fund managers independent of the markets. Only then do we feel that investors can truly determine whether they are getting paid for the risk they take.
The Quest Investment Process
The success of any financial plan depends how successfully the investment plan can meet or exceed the long term objectives established for it. The Quest investment process, centered on the management of risk, provides just such an approach.
Forward-looking, Capital Market Assumptions *.
Model construction that breaks down risk and return into "active" and "market" components.
Experienced Investment committee review applying active return (alpha) overlay to passive estimates.
Historical back testing to validate forward assumptions and their practical application in portfolio construction.
* Forward looking capital market assumptions provided by Mercer Investment Consulting. There is no guarantee that any strategy or recommendation will ultimately be successful. Past performance, while indicative, does not guarantee future results.
Financial Analysis to gain clear understanding of goals, objectives, constraints and investable resources.
Formalized Investment Policy Statement (IPS) that establish reasonable expectations, sets out an asset allocation for a well diversified asset mix and provides a framework for benchmarking, reporting and rebalancing.
Process that takes time to educate and manage client expectation helps simplify the complex and ease decision making.
Portfolio Strategy Selection to meet criteria established by the IPS and introduction of active risk budget.
Investment Manager Selection incorporating open architecture and proven risk management.
Independent research and due diligence that is in depth, stringent, and unbiased to identify high-quality managers that include qualitative and quantitative analysis.
Performance Measures that extend beyond simple checks of return. Use of attribution analysis to understand source(s) of performance and impact of asset allocation policy and manager selection.
Ongoing tracking including rigorous benchmarking and proactive selection and replacement of investments chosen to implement allocations.
(There is no guarantee that any strategy or recommendation will ultimately be successful. Past performance, while indicative, is not a guarantee of future results.)