Asset allocation is the primary determinant of performance.
Polygon follows a top down process designed to maximize returns across asset classes and countries. We believe that being in the right market is more important than buying the right security. International investment is a key component of our strategy and we seek to use a contrarian approach to opportunistically find value across markets and asset classes.
Diversification is the most efficient way to control risk.
By using a core satellite strategy, investing the bulk of our assets in a conservative, low volatility mix of stocks, cash and bonds, Polygon seeks to lower risk per unit of return. Movements between markets (correlations) are analyzed to try to ensure the maximum diversification benefit.
Risk is acceptable in areas of the market where there is a greater probability of success.
Depending on a client’s objectives and risk tolerance, portions of portfolios may be invested in inefficient sectors of the market. Examples of these could include: smaller companies in the US, emerging markets, and alternative strategies. To reduce volatility, exposure to these types of investments will be limited.
Stock picking often does not work well in efficient markets like the US.
Over the past twenty years the average US equity manager has subtracted 3% a year from market returns through stock selection. Polygon uses passive instruments including ETFs (exchange traded funds) as a low cost way of gaining exposure(cheap beta) to large cap equity styles in the US and other efficient portions of global equity markets. However, in cases where we believe we have an informational advantage or have identified an exploitable inefficiency we do not shy away from actively picking individual stocks.
Transaction costs significantly reduce performance.
By minimizing turnover and commissions, Polygon seeks to reduce the drag of transaction costs on performance. We do not believe in extensive market timing but do seek to re balance our portfolios on a regular basis.
Smaller is better in fund management.
Smaller managers have been shown to generally out perform larger ones. They are independent and therefore do not have to buy “house products”; they are focused and are not subject to conflicts of interest; and they often have a substantial portion of their own net worth invested, i.e. they are acting as principals, not agents. The owners of Polygon have the vast majority of their net worth invested in Polygon.
Service is critical to a successful fund management relationship.
Understanding client objectives is the first, and in many ways the most important, aspect of a relationship with Polygon. We work hard to help clients define their overall objectives, risk tolerance and future liabilities before formulating an investment policy and guidelines which are designed to give them the best chance of achieving them. Polygon prides itself on its integrity, on putting its client’s interests first and on providing clients with a transparent flow of information tailored to their needs.