Baggot Multi-Strategy – Absolute Return Portfolio (BMS) is a Global Absolute Return strategy which aims to provide positive annualised investment returns in all market conditions on a medium to long term basis. The BMS-ARP strategy utilises ten individual strategies, which are employed to varying levels dependent on market conditions. Each individual strategy is detailed overleaf.

The strategy uses a rule based, quantitative, systematic and data driven approach.

Baggot Investment Philosophy:

• Managing risk is the most important factor in the field of portfolio management. Unless you can manage risk effectively, it is difficult to generate consistent investment returns. Risk is the first factor to be considered when investing, and should be considered before investment returns are targeted.
• Portfolio diversification provides significant benefits in decreasing risk.
• The three most important factors for achieving a stable configuration of superior risk adjusted returns are Correlation, Volatility and Market Trend.

The Baggot Investment Partners (“Baggot”) approach has been formed by our own experiences in institutional capital markets, but also heavily influenced by the principles of legendary hedge fund manager Ray Dalio (Risk Parity) & the work of Nobel Laureate, Harry Markowitz (Modern Portfolio Theory). Quite often when using a single broadly diversified strategy, most strategies (even those which outperform benchmarks over the long term) can go through long periods where they are in drawdown. Some strategies, while profitable over the long term, can underperform their benchmarks for up to 3 years before normalising. Baggot are inherently uncomfortable with this and since we do not know what will happen in the future, we have chosen to take “Markowitz” & “Dalio” to a new place – A strategy of diverse strategies.

Our strategy of strategies significantly decreases the risk of going through a prolonged period of drawdown. We are also able to decrease the magnitude of drawdowns by placing higher portfolio weightings on un-correlated strategies and lower portfolio weightings on highly correlated strategies.

The strategy aims to achieve returns during both positive and negative market conditions, by using a combination of investment strategies, primarily focused on trend following, buying traditional low risk assets, and by having the ability to take inverse ETF positions (where conditions warrant).

Dalio pioneered implementation of Risk parity a portfolio allocation strategy based on targeting risk levels across the various components of an investment portfolio. The risk parity approach to asset allocation allows investors to target specific levels of risk and to divide that risk equally across the entire investment portfolio in order to achieve optimal portfolio diversification for each individual investor.

Markowitz pioneered Modern portfolio theory (MPT), which is a theory on how risk-averse investors can construct portfolios to optimise or maximise expected return based on a given level of market risk, emphasizing that risk is an inherent part of higher reward. Under MPT we aim to construct an “efficient frontier” of optimal portfolios offering the maximum possible expected return for a given level of risk.

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