We manage a range of strategies to offer Emerging Markets exposure to your portfolio
01. Long Only EM
02. Market Neutral EM
03. Small Capitalization EM
Our investment approach is fundamentally driven and systematically implemented
Nipun believes that investment success is based on applying fundamental and behavioral insights within a systematic investment process. Our approach to investing is grounded in the conceptual theories of firm Valuation and behavioral finance. These insights are adapted by country/region to take into account the intricacies of each market.
We believe that often, defense is the best form of offense. To us, risk management is as important as alpha generation and we use multiple approaches to manage and measure risk in our portfolios. We aim to be intentional and disciplined about risk management and only take risk where we expect to get rewarded for it.
Systematic Fundamental Investing
We believe that the daily prices of individual stocks are informed by, but not constrained to, their long-run fundamental values. Because short term prices can reflect capricious investor sentiment, systematic investing based on sound fundamentals will generate consistently higher average returns. Our strategies are designed to identify firms with solid fundamentals trading at reasonable prices, and to avoid firms with contrary features.
We begin with a simple economic question: “What drives stock returns?” We believe firm level returns are a function of current and future fundamentals (as measured by expected residual income, dividends or cash flows), and investor sentiment (non-fundamental price pressures associated with behavioral biases or liquidity driven demand). Hence, our stock picking approach is focused sharply on detailed analyses of company fundamentals and investor sentiment. The Nipun approach is not high frequency “black box” arbitrage, nor are we betting on macro trends. We focus exclusively on stock selection by applying our investment framework.
Disciplined Risk Management
Risk management involves skill, experience, and unwavering discipline. The Nipun team is deeply skilled and experienced in risk modeling and our commitment to disciplined investing is absolute. The risk budget of the strategy is spent in areas where we believe our informational advantage is greatest. Our goal is to be careful stewards of the budget we are given, and never take more risk than promised.
Broadly speaking, there are three types of risks that concern us. The first relates to beta, country, currency and other common sources of risk. The second is risk arising from changing market conditions and the impact these changes may have on our sources of alpha. We strictly manage both of these types of risk. The third type of risk emerges from extreme episodic events. Such events may relate to the liquidity preference of a certain group of investors. While these events are hard to predict, the impact from such event is generally short lived and prices eventually revert to fundamentals. The most appropriate course of action at these times is to stay true to our investment discipline, while managing potential downside.
The sources of risk and their importance varies over time. Factors that drove volatility in 1998-1999, 2007-2008 and 2009 were all different and the factors that will drive volatility in the future will be different as well. The lessons we learned first hand over the market cycles have shaped our views. Nipun takes a comprehensive approach to risk management, evaluating sources of risk across geographies, time horizons and modeling techniques.