Hillsdale's investment process uses a proprietary, dynamic, multi-factor ranking approach to stock selection and to the management of leverage and net market exposure. Inputs are largely fundamental, expectational and technical and are collected from many different source databases. Securities are reviewed regularly for their adherence to specific decision rules and for their contribution to increasing return and/or reducing risk. Stocks with a low marginal contribution to risk-adjusted returns are sold or covered and replaced with stocks with the highest contribution then available.
The methodology is based on a cycle of continuous improvement utilizing a platform featuring proprietary databases, investment applications, simulation software and financial modeling systems. Hillsdale's investment research team, with experience in the specification, design, and application of quantitative money management, draws its expertise from the fields of finance, computer engineering, econometrics, mathematics, business and accounting.
The investment process is fully integrated across research and stock selection processes, portfolio construction techniques, the active portfolio, risk and factor monitoring and performance measurement and evaluation reporting. All components of the process are tied together through various feedback loops. The process is dynamic, consistent, repeatable and risk controlled. The search for new variables and factors that either predict or control equity returns is ongoing. All new data items, data sources or algorithms resulting in either increased return or reduced risk are immediately fed through to all applicable portfolios. Once launched, all portfolio risk and return characteristics are monitored daily against pre-established tolerances. This way the Manager can evaluate if disparities in actual performance are "random" or in need of corrective action.
The process is 100% systematic and incorporates a rational decision-making structure based primarily on investment fundamentals. Hillsdale ignores common fallacies such as rumours, hot stocks, price targets, gut feel, and economic reports with spurious correlation to individual stocks. What Hillsdale's models simulate - investors receive. Hillsdale uses its ever-improving proprietary simulation software and its proprietary data collection and manipulation techniques for non-linear portfolio construction and optimization techniques. Few managers are as disciplined.
Hillsdale’s methodology follows a very deliberate process:
- Setting objectives
- Simulation
- Optimization: Stock selection using multi-factor ranking
- Control
- Feedback / Redesign
- Active Portfolio
- Risk and Factor Monitoring
- Performance Measurement and Evaluation
- Feedback / Redesign
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