The Concept of Absolute Investment Return
Wealthy individuals may generally divide their investable funds among equities, bonds, venture capital, real estate, hedge funds and cash & short-term deposits, etc. Cash and short-term deposits would increase in times of uncertainty or a bear market and would generally decrease when financial markets are bullish. Wealthy individuals would aim mostly to increase their overall wealth at higher than short-term deposit rates over time. It is, however, often difficult to enter or exit financial markets in a timely manner. Many opportunities are missed and even losses are sustained in an effort to balance between fear and opportunity. Investors would generally be disappointed by negative returns from equities and bonds over say a two- or three-year period, even though the historical evidence suggests that government bonds and equities have outperformed respective short-term deposit rates by around 2% to 4% over a business cycle.
Many of the large 'macro' hedge funds have shown dismal investment returns since the financial crisis. Single-focus hedge funds such as event-driven or merger arbitrage funds performed better when in vogue though their returns are cyclical. On the other hand, small boutique-type asset managers may outperform their bigger peers. Meltemi indeed is such a small investment management boutique, singularly focused on generating superior investment returns for its clients.
At Meltemi we focus on absolute investment returns; our investment style is not based on benchmarking to any particular market. We prefer to simultaneously focus on bonds, equities and currencies through a single coherent strategy. We believe that an investment return three to five per cent higher than deposit rates over time for a balanced portfolio with minimal credit risk can be generated by the application of sound investment principles, common sense and letting the power of compounding weave its magic.