Scientific Investing
Our analysis of nearly a 100 years of investment research & practice, led to the conclusion that value investing philosophy with its focus on minimizing risks (“Safety First”) can deliver true alpha over the long-term.
Scientific Investing is built on decades of deep research on value investing philosophy and the first principles of investment management.
Scientific Investing generates investment strategies which focus on generating alpha from safety. While surprising to academic finance, it is not at all so for a true Grahamian who understands the concept of “margin of safety”. The higher the safety, the more the alpha.
OmniScience Capital’s Scientific Investing Framework is the culmination of a multi-decadal immersion in understanding what has worked in investment management, and practicing it—primarily a risk-averse mindset while operating in risky asset classes—and a scientific mindset which requires focus on root causes and a reproducible, replicable approach. Scientific Investing focuses on the most important and powerful causes of investment returns and creates investment grade equity portfolios on any investment universe. In short,Scientific Investing focuses on buying Supernormal companies at Supernormal prices, thus directing the portfolio towards Supernormal returns, i.e. alpha.
OmniScience Capital’s Scientific Investing Framework implements a highly disciplined investing approach. The primary risks, i.e. ways of losing capital, have been identified and criteria to avoid or mitigate these have been defined. The number of stocks in the portfolio, the maximum allocation limits for a single stock or sector and the rebalancing frequency for the portfolio are also fully defined. At every rebalance it follows a zero-based approach and searches through the full investment universe to create the optimum portfolio in the market at that point of time.
Strategic Asset Allocation Strategies for
Developed & Emerging Markets
OmniScience Capital has used Scientific Investing to develop dozens of strategies in the developed markets (US, EU, UK, and Japan) and emerging markets, such as India, covering the whole gamut of large, mid, small, micro and total caps combined with our versions of value, core and growth.
Thematic Asset Allocation Strategies providing
exposure to exponential growth
While the former strategies are suitable for strategic asset allocation for institutional investors, we have further, developed thematic strategies for taking exposure to exponentially growing themes. For example, we have the world’s first virtual reality strategy, security sector strategy, and smart manufacturing strategy.
Scientific Investor
The Scientific Investor employs a scientific investment process which has a logical foundation based on the first principles of investing. The process must be based on a rational theoretical foundation. Then this theoretical foundation must be tested empirically and proven to work before it can be adopted by the Scientific Investor.
The Scientific Investor is distinguished through the presence of the following attributes: Originality, Character &Patience.
Originality
If an investor has a portfolio similar to the market, his expected returns should be similar to the market returns.
If the Scientific Investor intends to beat the markets, the stock selection process should be based on original thought. The search and selection process should be highly differentiated from the other participants in the markets. All this with the aim of finally having an original and differentiated portfolio.
Character
The Scientific Investor needs strength of character to be able to execute the original portfolio which is going to be uncomfortable since it is going to be different from the consensus view. This is a crucial step where many times investors fail due to not having the conviction in the portfolio since it is original.
Patience
Having identified an original portfolio and having the character to execute it, the Scientific Investor, now needs patience. Patience is required to give the market consensus view to change from the current one to a highly positive sentiment in favour of the stocks in the portfolio. The value unlocking happens as a result of the change in perception, which takes time and happens in response to internal developments in the company’s financials, operations, strategy or management control; or, due to external developments for the sector or the economy.