At the core of Infusion’s investment philosophy a belief that smaller managers in inefficient market segments and with demonstrable competitive advantages have a material advantage in achieving attractive risk-adjusted returns over their peers across a wide spectrum of absolute return strategies. Infusion has a disciplined approach to manager selection, portfolio construction, ongoing due diligence and risk monitoring. The approach combines a top-down macro-economic view with a bottom-up manager selection process and employs rigorous risk management at both the manager and portfolio level to achieve targeted risk-adjusted returns.
As part of the manager selection process, Infusion's Investment Management and Risk Management teams delve deeply into strategies to ascertain the manager’s edge, relative efficiency of the markets traded, and contribution to returns of beta and leverage. Quantitative analysis focuses on several key metrics, including return patterns, correlations against peer groups and performance benchmarks, length and size of drawdowns, time to recover, and performance during market dislocations, trying to identify risk factors that explain the manager's returns. Other areas covered include growth of assets under management, dispersion of investors, and observance of style drift.
Operational due diligence is conducted by Infusion’s Investment Management team and Operational Due Diligence specialists. The process combines interviews with managers and key personnel and onsite visits to their offices and service providers to understand and identify business risks associated with the individual manager. Background checks and secondary referrals are used to build up a comprehensive picture of the business and personnel that comprise that business. Business structure, legal documents, technology systems, regulatory filings, accounting statements, disaster recovery procedures and office security are also scrutinized.
Capital will only be allocated to managers after they have passed our thorough strategic, performance, risk management, and operational due diligence.
Once the managers have passed the lengthy due diligence process they become eligible for investment into one of Infusion’s investment programs. These programs can be either commingled or customized and combine the strategic positioning reflected by the Investment Management Committee with the world class underlying managers identified by the Investment Management Team. Portfolio weights reflect strategic and tactical views regarding the risk, return and correlation prospects for each fund and their respective asset classes, geographies and investment styles. The “structural diversification” resulting from allocating across fundamentally different strategies reduces risk and provides some protection against crisis scenarios in which correlations spike.
Ongoing Due Dilligence & Risk Monitoring
Due diligence by the Investment Management and Risk teams is ongoing within the partnership between IGP and its funds, as we continue to monitor and investigate the various dimensions of investment, risk and operations, and share our expertise, technology and resources – including third-party service provider relationships with funds. Portfolios are assessed regularly and repositioned when warranted by cost-benefit analyses.