Long / Short Investment Approach
GCM’s long/short investment approach leads to broadly diversified, optimized strategies with moderate-to-high levels of expected active risk and return. We seek to add value by taking long positions in securities we expect to outperform and short positions in securities we expect to underperform.
Philosophy and Objective
The approach is founded on the philosophy that we can capture excess return that arises out of certain pricing inefficiencies by building a diversified portfolio with a superior valuation and earnings profile. The overall objective of the long/short approach is to construct portfolios that take long positions in companies that are attractively valued and exhibiting the likelihood to meet or exceed earnings expectations, while taking short positions in companies that are significantly overvalued and experiencing deteriorating fundamentals. In doing so, we aim to provide long-term capital appreciation by outperforming the benchmark.
Quantitative Research
Before we begin to build the portfolios, we evaluate the investment universe using our Total Composite (“TC”) Model. The TC Model is based on bottom-up, fundamental research, which it conducts within a systematic, objective framework. The model evaluates companies based on valuation, earnings fundamentals and trading momentum to provide a comprehensive view of each company’s relative valuation, operational and financial performance, and stock price behavior. The model then ranks the universe of stocks from most attractive to least attractive.
Portfolio Construction
The portfolio construction process for our long/short strategies, like the research it is built upon, takes a bottom-up, fundamental approach. We seek to add value for our clients primarily through stock selection. The approach employs risk controls that limit over- or under-exposure to any particular sector, though within those bounds, we attempt to add value through sector and industry allocations. Long/short portfolios are constructed using risk modeling and optimization software. Positions are differentially weighted based on TC Model rankings and other considerations during the optimization process.
Philosophy and Objective
The approach is founded on the philosophy that we can capture excess return that arises out of certain pricing inefficiencies by building a diversified portfolio with a superior valuation and earnings profile. The overall objective of the long/short approach is to construct portfolios that take long positions in companies that are attractively valued and exhibiting the likelihood to meet or exceed earnings expectations, while taking short positions in companies that are significantly overvalued and experiencing deteriorating fundamentals. In doing so, we aim to provide long-term capital appreciation by outperforming the benchmark.
Quantitative Research
Before we begin to build the portfolios, we evaluate the investment universe using our Total Composite (“TC”) Model. The TC Model is based on bottom-up, fundamental research, which it conducts within a systematic, objective framework. The model evaluates companies based on valuation, earnings fundamentals and trading momentum to provide a comprehensive view of each company’s relative valuation, operational and financial performance, and stock price behavior. The model then ranks the universe of stocks from most attractive to least attractive.
Portfolio Construction
The portfolio construction process for our long/short strategies, like the research it is built upon, takes a bottom-up, fundamental approach. We seek to add value for our clients primarily through stock selection. The approach employs risk controls that limit over- or under-exposure to any particular sector, though within those bounds, we attempt to add value through sector and industry allocations. Long/short portfolios are constructed using risk modeling and optimization software. Positions are differentially weighted based on TC Model rankings and other considerations during the optimization process.