Global Portfolio Management
/ Research
Bob Anslow
Managing Partner and Co-Founder, Chief Investment Officer
Portfolio management at GlobeFlex has evolved into an adaptable process that is ready to address radically different market environments. We've learned to embrace reform while preserving our strengths. We know that just because a process has worked and you've benefited from it, you've got to challenge everything that you're doing today and do that again tomorrow, and again the next day and again the day after that - to keep challenging the embedded process and be open to thoroughly researched enhancements, if warranted.
Knowing is one thing; having the wherewithal is another. As a research-driven firm, we emphasize upgrading skill through finding good people and efficiency via a faster technology platform to speed up our ability to dissect portfolios and analyze attribution.
And the investment effort is not just seven people. We leverage skill by having a constant press of specialist data vendors working on specific projects. One night I totaled up the people who for sure were working on GlobeFlex projects the majority of that day and it was 27.
At GlobeFlex we stay alert to unintended bets to minimize risk, and are adaptable to enhancing our portfolio construction. We increased the efficacy of our stock selection through creating sector-specific models and also tightened portfolio construction. The modifications on the alpha side weren't just to pull in better short-term performance (although during the recent speculative market environment, better short-term performance would have been welcome); rather, we were upgrading our skill level for the long term.
Technology here is simply a tool to create more time for the human thought process. So as we increased the efficacy of our systems, we also added intellectual capital in the form of a "virtual" investment team: Bob Olson and John Guerard, great portfolio management theorists and tenacious researchers; and John Philson, a database expert who isolates the most pertinent nuggets from our vast customized databases. These talented, independent people make a
serious commitment to GlobeFlex projects, ensure that our testing mimics reality and play instrumental roles as we test and enhance the validity of our disciplines.
They link up daily with GlobeFlex colleagues, tools and customized databases, but are insulated geographically from the demands of portfolio management. And they aren't influenced by the comfortable groupthink that can often take hold in a close-knit, cohesive culture like GlobeFlex, especially after a period of success.
We'll always be fundamental stockpickers. We'll always be systematic in our approach. And we'll always be a focused, active, research-oriented manager. But we also will always be flexible, because markets are never going to be so stable that you can figure it out once and for all. Your process has to be constantly evolutionary.
Andrew Mark
Partner, Portfolio Management/Research/Trading
To me, the most exciting evolution at GlobeFlex is our seamless electronic integration of alpha, risk, and transaction costs into our newly reengineered research platform. Then customizing it to the way we want to build portfolios and being able to execute it quickly over to our trade-
order management system. The whole process is unbelievably adaptive.
Our flexibility is enormous. Rather than portfolio-by-portfolio analytics, we can now "plug and play" as many variables as necessary both at the individual stock and portfolio level.
We've built a customized optimizer, which includes all our return, risk and transaction cost information. We continue to weigh the important questions: How much time do we have to implement/trade? How good is our information? What is our sustainable edge? How much and what kind of risk are we taking? We determine how quickly to trade a stock and how best to trade it via traditional channels or on crossing networks.
Having all things integrated means we can truly focus on maximizing our information ratio, and with a strong dose of repeatability. We have never before been able to reach this level of knowledge and confidence -- knowing that we now have the tools to cover all the bases.
Cherrie St. Germain
Partner and Co-Founder, Portfolio Management/Research
Portfolio analytics at GlobeFlex are not like the traditional portfolio manager, who looks at the same set of things every day for every stock. We try to discover the indicators or trends that are affecting market performance, looking at things from a different angle every day. Every day we ask ourselves, "How can we dig deeper"? Is capitalization driving the market now, or high beta stocks, or something else?" And the answer will give us an explanation for prior movement or an idea about market trends going forward.
It's like a scavenger hunt with no preconceived idea of what we'll find. For example, Bob Anslow will give me an idea about a possible market driver. Then I pull together pieces of data from a whole range of disparate sources to either substantiate that concept or prove it unimportant. I enjoy the hunt and will follow the trail, no matter how convoluted, until we have the evidence that says, "Aha, that's a trend" or "Nope, nothing there." When the evidence of a new market component is there, we'll discuss it and run a lot more analysis before inserting it into our process. Then we track its influence as the market changes.
This kind of detective work is a perpetual part of our risk control process -- a kind of self-correcting mechanism to uncover unknown market influences that can potentially hurt us. As they become apparent, we can avoid them and eliminate unintended risk.
Kurt Livermore
Portfolio Management/Research
The first thing that attracted me to GlobeFlex was the philosophical fit, that we manage money based on ideas that make sense economically, test everything we do in order to verify where there's merit, take risk where we expect to be paid.
Second, I wanted to join a small firm, especially once I discovered that their resources were on par with a large one. The advantage of our size is you can spend all your time doing the work and not navigating the layers. Coming up with an investment idea is hard enough but convincing others that it is good, when they may not like it because they didn't think of it, takes time away from productivity. At GlobeFlex, we put aside hubris and ego so that the team gets the credit.
Finally, there was the appeal of leaving a strictly delineated structure behind and combining portfolio management and research with an external client role. Meeting with clients reminds you everyday of why you're doing what you do. You also get ideas from clients, a lot are very experienced, and they've got their own insights on what makes stocks move. The dialogue is robust and I enjoy the sophistication curve in our business.
And here's another reason the GlobeFlex investment model makes sense - our virtual research team. In firms where you have PMs doing the research, you increase the chances of being practical but run the risk of having research pushed to the back burner (when in reality it should be first). When you have internal researchers off by themselves, you risk ivory-tower irrelevance. With our virtual team set-up, where responsibility for each research project is shared between a portfolio manager and dedicated researcher, we stay pragmatic plus someone's got the ball at all times. I think GlobeFlex is built to garner a significant long-term performance advantage.
Qiao Wen
Portfolio Management/Research
What I look forward to every morning when I walk through the door at GlobeFlex is being creative within a disciplined process. As a member of the investment team, more than half of my time is spent unifying client goals with our investment strengths. This takes the form of day-to-day portfolio shepherding, including custom guidelines to fulfill specific client needs-transforming values and desires into tangible reality. Due to the immense size of our stock universe, we are well able to do this without sacrificing alpha.
Where the real fun begins is the time I spend doing research. Unlike many systematic managers, the process doesn't start with data comparisons. We have lively and constructive debates about what drives stock prices from a fundamental standpoint and how we can identify it faster. The creative challenge is taking these ideas and morphing them into a stock selection discipline that fosters insight globally. By teaming with the outside researchers on our virtual team, by cultivating outside smart opinions, by being open, we overcome the potential for internal group think or personal bias. Over time, this results in a truly sustainable investment edge.
This alchemy can't happen anywhere. The cultural pieces have to be in place plus the size issue - firms smaller don't have the resources, firms larger don't have the freedom. The reason why I feel so excited here is that I am given almost carte blanche to pursue my creative ideas yet still have the accountability of being an important day-to-day component of fulfilling client needs.
Technology
Rick Allen
Manager, Research & Performance Database
Our expertise is in using technology to solve problems. I think all of the people here are very solution-oriented, and that's what gives us our advantage. Rather than just confining ourselves to a set solution, we look at the way the technology can assist us in making a decision.
Refinements and solutions to meet new problems often arise out of steps taken in our previous work. You have to keep upgrading, have to stay current with what's available. Not just faster and faster hardware; that's only an incremental solution. To address the base of a problem -- to solve the problem better or more efficiently -- that's where the people come in.
Working a new piece into the system - a nifty performance attribution engine, for example -- means having to come up with the way to feed it the right data, then getting the two computer systems to talk to each other. It's like building a road between two cities; you have to work around mountains and rivers and unstable ground to create a smooth, safe link. That's hard. You can't delegate that outside the firm. In this technology-driven business, it's almost impossible for one person to have all the expertise needed to do every job.
Where teamwork comes in is leveraging the talents of specialists, like the virtual investment team,
the database vendors, and the software vendors we collaborate with.
The external consultants on the virtual investment team work with the customized data I put in place. John Philson runs simulations and backtesting for the historical analysis we need to confirm our disciplines. Bob Olson's understanding of portfolio management issues helps us define what we have to deal with. Once these two have put together the elements we need to solve a research problem, the investment team here approves it and I then create the handshake that works the new piece into our system.
Furio Penteriani
Manager, Network & Systems
At GlobeFlex, our goal is to apply technology to any function - investments, trading, operations, client service, everything -- verging on the routine. To automate correctly, at the point of change, so you don't have to reinvent later on is the creative challenge of my job. The other part is day-to-day systems evolution: maintenance, no down time ever, and keeping our technological advantage.
I saw complexity close up as a technical account manager working with the IT departments of various Fortune 500 financial institutions. What is different about GlobeFlex is that we put IT at the core of our firm, not on the periphery. From the beginning, our process was geared to sophisticated customization, as opposed to the bandage-and-rehaul firedrill embedded in more traditional firms.
Our streamlined platform is as good as any out there but advantaged with tremendous ease of use at the front end. I am familiar with all the systems that make us run, making it possible to key in and design a structured plan of attack to increase efficiency. My job is to smooth out the whole system - to keep it well oiled and responsive to the demands from a creative culture, as well as the steady stream of requests from our clients.
Essentially, what the portfolio management and operations teams take for granted, I take care of. In contrast to Rick whose total concentration is on research side of the technology equation, my mandate is broad. I sit at the hub, between investing and trading, close to compliance and accounting - which gives me an ear to what's coming up in the queue, an insight on where we might customize, an ability to think ahead to the consequences for change. Because of our team structure, it is easy to reach a decision and once that's done, we execute. Then it's on to the next innovation.