Mosaic Invest’s investment approach incorporates rigorous financial modelling, in-depth analysis of macro-economic drivers, understanding the merits of various investment styles, appropriate diversification, an appreciation of the benefits of unconstrained asset allocation and finally a robust risk framework within which portfolios are constructed.
Mosaic Invest regards its rigorous financial modelling of all the companies it invests in as one of its main competitive advantages. An in-depth understanding of how changes of various financial metrics such as revenue, expenditure, margins, capital expenditure, etc. affects the profitability of a company is key to making intelligent investment decisions.
The macro-economic forces that drive the global economy are key inputs into Mosaic Invest’s financial models. These drivers include interest and foreign exchange rates, inflation, energy and commodity prices, asset prices, consumer and business confidence and many more. The firm spends a considerable amount of time and effort to model the potential future movements of these variables.
Mosaic Invest recognises the merits of various investment styles and constructs its portfolios with the best investment ideas using a variety of investment styles. Rather than dogmatically pursuing a single investment style the firm aims to own a selection of value, growth, contrarian, momentum and turn-around shares.
Mosaic Invest is of the view that good investment ideas are very scarce and this is reflected in our somewhat more concentrated portfolios. The firm is critical of naive diversification where a portfolio invests in a wide variety of assets with the simple hope of lowering the variance of expected returns.
The firm has conservative factor exposure limits in place that is monitored continuously.
Asset allocation is the investment process that apportions a portfolio’s assets across the three major asset classes being equities, fixed-income products and cash. Each of the three assets classes have very different risk and return profiles causing them to behave very differently depending on the market and economic forces at play.
An unconstrained asset allocation mandate allows Mosaic Invest to take intelligent investment risks and to avoid exuberant risk-taking by dynamically adjusting the exposure to various asset classes in response to prevailing market conditions. By doing this the firm aims to avoid major sell-offs and to improve both absolute and risk-adjusted investment returns.
A robust risk management framework overlays Mosaic Invest’s portfolio construction process. Every investment decision is risk-weighted to reflect the anticipated pay-off profile of that investment and any company and industry specific risks to ensure that portfolios are not exposed to unwanted risks.