Investment Process

INVESTMENT PROCESS

Lodestar has a developed a rules-based investment process that we use to manage all of our portfolios. The process has three distinct components that can be individually calibrated and combined to suit a wide range of investment products.

Security Selection

Our aim is to select a wide range of liquid securities which allows us to effectively diversify the portfolio and avoid liquidity risks. The security selection process can accommodate a wide range of needs. This ranges from full market exposure to ethical investing with a heavily constrained investment universe.

 

Target Strategy

We have developed a statistical benchmark targeting framework that can be calibrated to a range of desired outcomes from low risk benchmark agonistic to tracking error minimization. The target strategy combined with the security selection process creates many potential portfolios for example low tracking error ethical investments.

 

Portfolio Construction

Portfolio construction is the core of our investment process and determines an exact weight for each constituent so that the portfolio forms a cohesive, well diversified whole. Our portfolio construction is entirely rules-based with no subjective inputs. This process addresses a common weakness of bottom up or factor investing approaches that does not have an explicit portfolio weighting methodology. Our scientific approach to portfolio construction is a key distinguishing feature of our investment process.