Our Strategic Advantage
The edge you will get with Paisley Financial lies within our strategic design to Capital Management. Our Trilateral Active Management approach is our optimal way to achieve maximum diversification & growth, as it encompasses all of our active management capabilities into a single, engine.
Active Strategic Management
- Growth Strategies
An aggressive portfolio strategy mostly comprised of our top growth stocks which aims to maximize capital growth. Risk is typically managed through the use of a well-diversified stock portfolio.Learn More
Strategies that attempt to achieve growth but is averse to taking on large amounts of risk by tilting towards stocks, up to 60%. Growth is placed as the primary emphasis and current income as their secondary emphasis though may change depending on prevailing market conditions.Learn More
An amalgam of fixed income & short term revenue generating instruments that are focused on low risk objectives. The investments sought are of a high yield with a steady dividend history. Option strategies may be use to grind out additional gains or to work as a volatility hedge.Learn More
Hedge Fund Style (Long/Short)
Our Trilateral Active Management approach is our optimal way to achieve maximum diversification & growth, as it encompasses all of our active management capabilities into a single, engine. The strategy incorporates all of our fixed income, currency, equity and commodity trading strategies we have developed into a model that will ebb and flow with volatility, growth, recessive interruptions or trends.Learn More
Active versus Passive Management
Active management is the art of stock picking and market timing. Passive management refers to a buy-and-hold approach. Buy and Hold worked well enough until 2008 when the DOW dropped 37% and has still not recovered. To understand the right choice for you, please learn more below.Learn More
Hedge Fund Style
Our Trilateral Active Management approach is our optimal way to achieve maximum diversification & growth, as it encompasses all of our active management capabilities into a single, engine. The strategy incorporates all of our fixed income, currency, equity and commodity trading strategies we have developed into a model that will ebb and flow with volatility, growth, recessive interruptions or trends and all invested in a securities-only product.
The strategy can be tailored to fit most portfolios or broken into separately managed solutions dependent on how conservative or aggressive the customer’s risk profile suggests. As a result, TAM can be implemented in a variety of ways, from a "hedge fund" style strategy (managed over a cash benchmark with higher volatility), to an "enhanced-index" strategy (over a stock or bond benchmark with lower volatility), to a "global tactical asset allocation" strategy (overlaid onto a multi-asset class benchmark).
This type of investment strategy
is generally associated with hedge funds, and more recently
certain progressive traditional asset managers. It involves
buying long equities that are expected to increase in value
and selling short equities that are expected to decrease in
value. This is different than the risk reversal strategies
where investors will simultaneously buy a call option and sell
a put option to simulate being long in a stock.
Typically equity long short investing is based on 'bottom up' fundamental analysis of the individual companies in which investments are made. There may also be 'top down' analysis of the risks and opportunities offered by industries, sectors, countries and the macroeconomic situation.
Long short covers a wide variety of strategies. There are generalists, and managers who focus on certain industries and sectors or certain regions. Managers may specialize in a kind of stock, for example value or growth, small or large. There are many trading styles, with frequent or dynamic traders and some longer term investors.
A fund manager typically attempts to reduce volatility by either diversifying or hedging positions across individual regions, industries, sectors and market capitalization bands and hedging against un-diversifiable risk such as market risk. In addition to being required of the portfolio as a whole, neutrality may in addition be required for individual regions, industries, sectors and market capitalization bands.
There is wide variation in the degree to which managers prioritize seeking high returns (which may involve concentrated and leveraged portfolios) and seeking low volatility (which involves more diversification and hedging).
Long / Short Strategies
An equity long-short strategy is an investing strategy involves taking long positions in stocks that are expected to increase in value and short positions in stocks that are expected to decrease in value.
You may know that taking a long position in a stock simply means buying it: If the stock increases in value, you will make money. On the other hand, taking a short position in a stock means borrowing a stock you don’t own (usually from your broker), selling it, then hoping it declines in value, at which time you can buy it back at a lower price than you paid for it and return the borrowed shares.
Equity Long / Short strategies simply do this on a grander scale. At its most basic level, an equity Long / Short strategy consists of buying an undervalued stock and shorting an overvalued stock. Ideally, the long position will increase in value, and the short position will decline in value. If this happens, and the positions are of equal size, the hedge fund will benefit. That said, the strategy will work even if the long position declines in value, provided that the long position outperforms the short position. Thus, the goal of any equity Long / Short strategy is to minimize exposure to the market in general, and profit from a change in the difference, or spread, between two stocks.
That may sound complicated, so let’s look at a hypothetical example. Let’s say you take a $1 million long position in Pfizer and a $1 million short position in Wyeth, both large pharmaceutical companies. With these positions, any event that causes all pharmaceutical stocks to fall will lead to a loss on the Pfizer position and a profit on the Wyeth position. Similarly, an event that causes both stocks to rise will have little effect, since the positions balance each other out. So, the market risk is minimal. Why, then, would a portfolio manager take such a position? Because he or she thinks Pfizer will perform better than Wyeth.
Equity long-short strategies such as the one described, which hold equal dollar amounts of long and short positions, are called market neutral strategies. But not all equity long-short strategies are market neutral. At times it can be opportunistic to maintain a long bias, as is the case with so-called “130/30” strategies. With these strategies, you may have a 130% exposure to long positions and 30% exposure to short positions. Other structures are also used, such as 120% long and 20% short.
You can also be distinguished by the geographic market in which they invest, the sector in which they invest (financial, health care or technology, for example) or their investment style (value or quantitative, for example). Buying and selling two related stocks—for example, two stocks in the same region or industry—is called a “paired trade” model. It may limit risk to a specific subset of the market instead of the market in general.
Equity Long / Short strategies have been used by sophisticated investors, such as institutions, for years. They became increasingly popular among individual investors as traditional strategies struggled in the most recent bear market, highlighting the need for investors to consider expanding their portfolios into innovative financial solutions.
In summary, Equity Long / Short strategies may help increase returns in difficult market environments, but also involve some risk. As a result, investors considering these strategies should talk to a Paisley Advisor to see if this type of investment may be suitable for you.
In simple terms TAM can scale up or down, focus on opportunities as they occur, and be tailored to fit your needs based on your risk parameters.
Contact a Paisley Advisor to see how TAM can help you.