Top-Down Macroeconomic Analysis
Interinvest's investment model begins with a "top-down" approach. Through an analysis of the current economic and geopolitical landscape, we anticipate secular trends and how they affect the world's financial markets. We believe that achieving above-average risk-adjusted returns starts with preserving capital during periods of market turmoil. The first step in our "top-down" approach is to identify when and where we think markets are most at risk. We believe we add significant value by simply avoiding what we judge to be the riskiest sectors of the market.
Interinvest's professional investment staff monitors a number of macroeconomic factors: The economic environment, central bank monetary policy, the inflation outlook, market performance, expectations for corporate profits and growth, and the political climate. By assessing the character of these "big picture" indicators and their potential impact on investors’ returns we make the major asset allocation decisions that allow us to proceed to the next level in the investment process.
Bottom-up Security Selection
While the top-down analysis described above drives the investment process, it is the selection of individual securities that is ultimately responsible for the returns our clients enjoy. When it comes to selecting the components of our portfolios, the selection process is driven by a "bottom-up" approach. We are always fundamentally looking for situations where we believe the market is mispricing an asset. That mispricing can manifest itself as undervalued property, an unrecognized product cycle, or an early-stage business turnaround. Our concept of value in these cases is often informed by our macroeconomic analysis. Additionally we keep an eye out for certain known situations, such as M&A activity or even simple news flow, that can serve as catalysts for either creating a mispricing – or collapsing it.
In spite of practitioners' efforts to portray investing as a science, it is our belief that there is a considerable amount of art involved in steering a successful course through the myriad of investment risks and opportunities. There is no substitute for experience and perspective.