Guide to methodology
The objective of and rationale behind FischView
In the FischView we provide the reader with the views of our investment experts on the financial markets. In particular, we focus on the asset classes most closely associated with Fisch Asset Management, namely credit and momentum.
Each month we publish the perspectives of our Investment Committee. In it, we pay special attention to the outputs of our various models, which provide us with valuable signals in our core disciplines of economics, trends and valuations. On a monthly basis, we provide readers with the highlights of and the most significant changes to our assumptions and findings in a handy two-page format. The quarterly FischView editions additionally provide in-depth analysis of our various models and explain in detail our observations on a macro and asset class level, and what impact these have on our top-down investment views.
The FischView is based on the monthly Asset Allocation Meeting, in which our specialists in each individual asset class, many of whom have decades of experience, present their analysis and voice their opinions. The presentations of all members are subsequently debated and scrutinised to ensure that the Investment Office is best placed to formulate the top-down investment strategy.
One of the aims of the FischView is to make the rationale for our investment decisions open and transparent. Second, the FischView contains a list of the current most preferred (and least preferred) country and/or sector allocations by asset class.
We hope the FischView offers you in-depth insights and we welcome any comments or critiques you may have.
Methodology for the top-down investment process
Across all strategies, Fisch Asset Management uses a combined top-down/bottom-up approach for idea generation. In top-down research, the focus is on the continual analysis of the
macroeconomic environment and financial markets. We have a structured analytical process
in place and apply proprietary models. The result of this process – the FischView – becomes
our basis for setting out the relevant exposure ranges in our investment strategies and is also
made available to external interested parties each month.
The FischView draws on three component models (economics, trends and valuations).
Macroeconomic model
Analysis of the macroeconomic environment is based on our proprietary macro model and
has four input factors:
- The Fisch cycle model, which reflects an overall view on the equity and interest rate environment
- Assessments of monetary liquidity and the overall monetary environment
- An analysis of yield curves
- Key leading indicators with a high predictive value
Trend model
In our trend model, we calculate various medium-term trend indicators for the equity, interest
rate, currency and credit markets. These indicators are based on historical price data and
measure how well each of the asset classes has performed in the past. The better/worse an
asset class performed in the past, the higher/lower our expectation for the future. A major
factor in our analysis is our proprietary trend indicator, which exponentially weights the historical risk-adjusted returns of the various asset classes.
Valuations
In the valuation section we give a detailed overview of current valuations for the markets of
relevance to us: credit, convertible bonds, equities and interest rates. For interest-bearing instruments, we use the slope of the yield curve (yield on 10-year minus 2-year sovereigns) as
the risk premium for duration risk. To judge valuations in the investment grade and high yield
credit markets, Fisch predominantly uses short-term credit market outlook indicators, CDS
movement, liquidity patterns and fund flows to indicate market richness or cheapness. The
output is overlaid with various external fair value models to determine an overall credit score
for various markets and regions.
For convertible bonds, we analyse trends in CB valuation by region. The analysis includes input
stock volatility, convertible bond implied volatility and rich/cheap measures based on the difference between trading prices and fair value models. The model outputs are intended to indicate the prevalent direction of risk to convertible bond valuations, which are also influenced
by net issuance patterns, fund flows and market-maker risk appetite.
Additional top-down inputs are used across the remaining asset classes. These are based upon
a number of different approaches, such as forward equity price/earnings multiples for equities.
Asset Allocation Meeting
The outputs of these three component models are aggregated and discussed by our team of
experienced specialists at the Asset Allocation Meeting each month to form the FischView.
Key topical investment matters and their influence on our products are also discussed at this
meeting, while we also set out areas in which we have a particularly high conviction.
Portfolio construction and importance of bottom-up analysis
The FischView forms the basis for our top-down-driven overweights and underweights in the
portfolio construction of all our strategies. They are also the starting point for the external
communication of our market opinion and our key positionings. In conclusion, however,
please note that bottom-up analysis (i.e. the analysis of individual securities and the associated sectoral and regional analysis) plays a pivotal role in all our strategies and is typically
expected to make a greater alpha contribution than the top-down research.