ARCH's forte is the construction of portfolios that both improve the robustness of returns and reduce overall risk. This requires a shift away from traditional risk analysis towards a more comprehensive framework. ARCH's versatile approach is adaptable to both benchmark-relative and absolute return portfolio management.
One of ARCH's core advantages is its extensive practical experience in asset and risk management. ARCH adopts a high level of rigour employing sound fundamental techniques and judgment, rather than a 'black-box' approach. Across the spectrum of asset types, ARCH seeks outstanding risk-adjusted return and diversification opportunities over multiple holding periods.
ARCH's investment philosophy can be expressed as follows:
- Systematically produce higher return at less risk, from forward-looking portfolio construction and analysis of assets and risks;
- Prioritise those activities which have the largest influence, namely currency, asset and risk allocation;
- Gauge how portfolio risk and return change with the prevailing market environment; and
- Maintain the flexibility to adapt to changing environments.
A Consistent Approach
In practical terms, successful implementation requires a consistent approach to be applied across the following areas:
- Integrated asset management and risk management;
- Mandate definition requires consideration;
- Objectives - benchmark-relative, absolute performance, solvency / other goal; investment timing / phasing; and
- Parameters - risk aversion, liquidity, time horizon, holding periods, asset quality, setting of constraints.
- Exploit the time varying and cyclical natures of investment opportunities;
- Use comprehensive analytical toolkit and in-house systems, alongside heuristic analysis;
- Carry out rigorous and systematic analysis to evaluate assets, markets and sources of risk;
- Understand portfolio risk and return interdependencies;
- Highly disciplined process with implementation flexibility; and
- Recognise implicit as well as explicit exposures being taken - their relative importance, price and benefit.
Strategic Risk Management
- Steer portfolios toward richer sources of risk-adjusted return;
- Diversify and manage global and specific exposures;
- Position portfolios to benefit from economic and market cycles;
- Revise the 'risk budget' over time to reflect the prevailing market regime and financial conditions; and
- Appreciate the changing and dynamic nature of capital markets and investors.
State of the Art Systems
"To the man with only a hammer in his toolbox, every problem looks like a nail."
attributed to Abraham Maslow
One of the single largest conduits of change in financial markets has been the increased availability and utility of information technology to the investment professional. This has led to the rapid development of sophisticated software tools, database engines and so forth, driving the growth of new markets and investing strategies.
To conduct the large volume of analysis now required at the 'coal face' of today's markets, investment firms must have powerful in-house analytical systems. To meet this demand, ARCH has developed a comprehensive investment and risk analysis platform. This combines statistical and market data systems with a high-end open-source data processing environment.
The ARCH platform provides the capacity to analyse extensive volumes of economic, market and manager data. This facilitates in-depth monitoring and disciplined analysis across a wide variety of portfolios and risk types, whilst accommodating simple or complex portfolio objectives. The system encompasses data sources of both a qualitative and quantitative nature that are integrated at a portfolio level.
An Integrated Investment Process
ARCH is an integrated asset management and structured investment business. The focus is across multiple asset classes both traditional and alternative, such as Private Equity and Private Finance. Within each of these, ARCH has entered many sectors such as asset-based lending, venture finance, infrastructure finance and sustainable investment.
By not limiting itself as to asset type or market focus, ARCH takes a holistic view across all investment alternatives, whether these be direct, third party, derivative or synthetic in nature.
Investment strategies are recycled as the prospects for some diminish and others come to the fore. A key element in creating value is to capture returns when markets are inefficient or in a depressed state (increasing risk-adjusted return outlook), reducing exposure as the markets become more efficient or crowded (decreasing risk-adjusted return outlook). Asset, financing and secondary market liquidity are key considerations when implementing such rebalancing.
ARCH applies a highly disciplined investment approach which makes full use of analytical resources and in-house systems. Before undertaking any investment, ARCH conducts a rigorous due diligence, which includes the probability of expected returns and risk, the underlying nature and subtleties of the investment, the professionalism and commitment of the management involved, and the ability for ARCH to monitor the investment with respect to risk exposure.
"All models are wrong, but some are useful."
On a quantitative level, the process involves the collection, storage and monitoring of large amounts of economic, market, manager and asset-specific data. Systematic analysis and modelling is then performed. A key part of ARCH's process is to map out the asset classes by type, by attribute and by risk / valuation indicator. This assists in the modelling of risk / return under different financial and market conditions.
ARCH conducts forward-looking macro analysis alongside more traditional investment analysis. Probability and confidence modelling, along with scenario analysis and stress testing form the backbone of this approach. This provides an objective framework against which ARCH can gauge its understanding of the drivers of foul, fair and other types of 'weather' for portfolios.
ARCH offers one of the most comprehensive assemblies of investment structuring and product advisory experience available in the independent marketplace.
ARCH uses a wide range of investment instruments and structured financing techniques in order to create better overall propositions. The Structured Investment team applies its expertise to improve returns and lower risk, as well as to create structured investment products. Structuring of new variants is a permanent feature of the market and continues to produce incremental returns irrespective of current investment fashion.
Structured investments range from the relatively simple, for example capital-protected equity exposure, to the more complex, such as tax-efficient hedge fund products in the German market.
Some of the key aspects of a decision to invest, such as tax treatment, investability, risk-return profile and capital usage can be improved through the structuring of the investment itself and accompanying 'wrappers'. Tailored portfolios and structured products are built to match investor requirements, bearing in mind such aspects. These are often combined with facilities such as non-recourse lending or capital protection, sourced from ARCH's investment banking partners.
The ARCH team provides innovative structures that benefit from privileged access, investment structuring and risk management expertise. In the first instance, this requires a thorough understanding of their client's environment - their opportunities, operating constraints and regulatory requirements. ARCH works with all parties to find the most suitable business solutions, presenting clients with a truly independent perspective on business, investment and product options.
ARCH's capabilities in structured investment support the set up and implementation of many types of portfolio and product. This ranges from the co-ordination of third party services (broking, custody, administration, legal, tax, audit) through to the negotiation of advantageous terms and access. Ongoing monitoring of investments is performed both externally and internally, both from a top-down risk / return perspective and for bottom-up cash flow, trade and position reconciliation. ARCH provides a high level of portfolio reporting, including commentary on markets and detailed risk, cash flow and position analysis.
ARCH has genuine expertise and a demonstrable track record across many investment disciplines and asset types. This is one of the Group's principal strengths in working with institutions and developing innovative solutions.
Previous projects completed include:
Formation of structured investment business lines and products
Business advisory, strategic new product development
Principal protection, flexible leverage facilities
Active product and portfolio risk overlays
Risk management solutions for banks and fund managers
Skills transfer for investment bank professionals
Locally-compliant, tax-efficient investment structures
Product wrapper (trust, equity, debt, deposit, account, derivative)
Product disaster management and avoidance
Structured financing, asset repackaging
Derivatives and capital markets advisory
Asset-liability, balance sheet analysis
Syndicate organisation for product and/or fund distribution
Capital introductions, marketing analysis and support
Due diligence and consultancy services
Formulation of alternative investment strategies
Within assets and sectors such as:
Life and pension annuities
Hedge Funds, Private Equity, proprietary trading
Derivative, synthetic /asset-backed investments
Mortgage, loan, reversion, swap arrangements
Private Finance Initiative (PFI) projects
Inflation indices (RPI, LPI, CPI, HICP)
Alternative Risk Transfer (ART) instruments
ARCH Markets - Specialist investment opportunities
For highly sophisticated investors only
Since 2002, one of ARCH's core competencies has been the provision of impartial advice to sophisticated investors on their investment selections, strategies and associated structuring.
The ARCH Markets platform provides access to select third party projects, products and services with particular focus on alternative investments. This includes various asset-backed financings, regionally-focused investments and access to other specialist investments where our partners have successful, differentiated approaches within their field. Assets may be acquired and developed in the form of notes, equity syndications, placements, investment companies or other formats.
Please Contact Us for further details