W&F Issue 9 2018

www.wealthandfinance-news.com 20 Wealth & Finance International - Issue 9 - 2018 In the world of investment, results speak much louder than words. The most successful firms learn to think outside the box, and utilise innovative, intelligent investment strategies that can adapt and evolve with a dynamic market environment. By all regards, Convector Capital Management’s results, attained through best in class risk-adjusted returns, secure it as one of these industry-leaders, setting a brisk pace for others to follow. As Convector’s Managing Partner, Emmanuel Ferreira is certainly well-placed to guide the future of a firm which aims, simply, to do things better than a long-established status quo that is providing inadequate returns. To start the interview, Emmanuel takes a moment to emphasise an impressive track record, “We have a history of providing returns above that of the market with less than half the risk, as measured by beta and standard deviation, which has resulted in a Sharpe Ratio of 2.8. On the back of this, we have amassed a client base that is comprised of large financial institutions, specialised firms, high net worth individuals and investors.” Convector shows confidence in their strategy by investing capital alongside clients, aligning interests. Equally, Convector realises that their approach to investment is the best way to manage their own capital. This is a refreshing perspective in an industry occupied by many indifferent investment institutions. In recent years, the investment sector has seen a vast paradigm shift that looks set to continue for the foreseeable future. Emmanuel highlights the importance of establishing innovative practices to investment. “The industry is continuously evolving, and our view is that the truly revolutionary changes are just beginning. We have a long history of innovation. We created one of the first mutual funds that could short and use derivatives. We also have had a long standing view that economic analysis is an important component of fundamental analysis and not a separate specialty. This broader perspective with added investment flexibility allowed us to navigate the financial crisis with ease and continues to help overcome the primary challenge facing the industry, which has been subpar returns.” Emmanuel continues, “Poor returns are not a function of weak markets, which on the contrary have been strong, but of weak investment processes. The capital in legacy investment philosophies, when faced with the evidence that they lack effectiveness, has transferred in large amounts to low-cost ETFs. The resulting fee compression means fewer resources are dedicated to fundamental analysis. This provides a greater set of opportunities that enhance the effectiveness of our strategy.” The conversation soon turns to Convector’s competitors, and how the firm remains at the forefront through technological innovation and development, specifically through the application of machine learning. For Convector, AI and machine learning are essential elements to future success, streamlining their internal processes. “One of the biggest changes for us has been the empowering of our people and processes with machine learning that improves performance. We now have a database of over 7000 public companies globally whose fundamentals, historical and prospective, are rigorously analysed against market dynamics to structure a more effective portfolio for our clients.” “We have always had a defined process that was based on empirical evidence. Having to code that process instils a discipline of clarifying and defining that helps elevate the understanding of what we are doing, what works and what needs to be changed. It enables us to track the effectiveness of our decisions in real time and adapt where needed. Being able to have an analyst focus Convector Capital Management was founded with a commitment to responsibly manage assets through a dynamic and flexible approach to global investing. In September, Convector was named by Wealth & Finance International Magazine as Most Innovative in Investment. On the back of this well-deserved success, we spoke to Founder and CIO of Convector, Emmanuel Ferreira, who gave us a unique insight into this truly ground- breaking firm. Utilising Innovation in Proven Strategies for Better Investments 1810WF05 on what is relevant, tracking that relevancy and identifying biases that may not be obvious helps make better decisions. It helps our professionals become better and more fulfilled because there is a clearer understanding of the relationship between what they are doing and performance. It allows us to focus on what is value added. Meanwhile the more commoditized functions that took hours of analyst time are now automated. This increases productivity significantly.” In his closing comments, Emmanuel moves on to specify the role that block chain technology will have on the future of investment: “Another innovation are digital ledgers that use block chain technology. They not only reduce the time and cost of a transaction, but more importantly improve transparency. This reduces many risks including mistakes and even fraud. Over time this will moderate the significant regulatory and operational costs incurred to protect a firm’s clients, but also protect a firm against mistakes or false accusations. When an investment allocation is made, reputational risk often supersedes the importance of historical returns. Block chain technology is fundamentally changing how these risks can be addressed and mitigated.” Ultimately, Convector Capital Management represent the promising future of the investment sector. They aim, above all else, to improve investment returns. Driven by innovative thinking they continuously adapt to the demands of an evolving market.