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Investment Philosophy
The key foundation of Beach Horizon’s investment philosophy is that financial markets are not efficient and experience persistence in behaviour in the form of price trends. This can be explained by influences of crowd behaviour and time delays for information to be absorbed into market prices. This causes markets to trend with many different time horizons and frequencies.
The key advantage for trading systems is that they can be built using information derived from price movements alone rather than having to interpret fundamental information. Price information is in a ready form for analysis whereas fundamental information is not. Since price data is provided electronically, automated analysis of prices is possible.
The programme is able to generate returns by taking risk-adjusted long or short positions in response to price movements in order to profit from persistence in trending behaviour.
Key Features of the Model
The Beach Horizon programme has a unique, sophisticated and robust model able to capture trending behaviour whilst managing risk. The model is the result of many years of research and development by the founders and includes many innovative features. The research team continue to enhance the model to keep pace with changing market environments and retain our competitive edge.
- Highly diversified, dynamically balanced portfolio
- Higher allocation to commodities
- Does not pre-suppose where returns will come from
- Sophisticated and robust model for an uncertain future
Investment Methodology
The Beach Horizon programme uses a proprietary portfolio weighting technique called Dynamic Balanced Weighting. The approach results in a highly diversified portfolio that has a consistently high weighting to commodities which is different to many other managed futures strategies. This is of benefit to investors seeking returns that are uncorrelated to stocks. The programme is therefore a good diversifier for investors with portfolios that are concentrated in financials. Since financial futures dominate many other managed futures portfolios this programme also can add diversification to portfolios that already have exposure to managed futures strategies.
The model works by continuously adjusting positions to rebalance the risk across the whole portfolio. This avoids the problem of over concentration of risk by not over or under allocating to the current winners or losers. Thus all sectors are able to contribute to returns since no one sector is favoured over another. This results in a more robust model for an ever-uncertain future. The model captures movement in multiple time horizons, taking advantage of short, medium and long-term trends simultaneously.
The model also includes many other unique and innovative features, taking ideas from many different branches of science and engineering. For more information on our investment methodology please contact .
Research
Research and model development is fundamental to our approach. The research team has over 50 years combined research and development expertise in the managed futures industry. The team has complimentary skills sets that combine trading expertise with quantitative mathematical skills.
The team uses a rigorous research process which follows scientific method. The goal is to remove any form of judgmental bias in the analysis of research results. The model is backed by rigorous research that shows the consistency of the model over many time frames and environments. Great care has been taken not to curve-fit the model in order to derive artificially good historical performance. Past performance is not a reliable indicator of future performance so the model is not optimised using historical returns. We believe this leads to a more stable model that is more likely to perform better in an uncertain future.
The team uses a bespoke research environment which allows for sophisticated yet productive research. The research environment is built from the same modules as the trading system. This gives us a high degree of confidence that simulated performance will closely approximate to live performance and allows research results to be easily incorporated into the trading environment with no translation error from theory into implementation.
Research work is ongoing and will focus on improvements in operational efficiency, improvements to the existing systems and blue skies research into new systems. As the business grows we will continue to expand this area.