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The investor using asymmetric investing to beat the MSCI Global Index

October 28, 2020

The investor using asymmetric investing to beat the MSCI Global Index

“Asymmetric investing is intuitively simple; produce above average returns with below average drawdowns.  To do this, you need to find good investments, and don’t lose money along the way of realising those good investments” – Kenny Arnott

“Asymmetric investing is intuitively simple; produce above average returns with below average drawdowns.  To do this, you need to find good investments, and don’t lose money along the way of realising those good investments” – Kenny Arnott

 

Volatility has become shorthand for market pain in recent years, but a volatile market can create immensely profitable opportunities for investors who know where to look.

One such investor is the next guest on Reach Markets’ Meet the Fund Manager series, Arnott Capital founder and chief investment officer Kenny Arnott. Kenny used this strategy to deliver annualised returns three times larger than the MSCI Global Index in the past seven years.

Over his 30 year career (including stints trading derivatives for millionaire factory Macquarie Bank), Kenny has specialised in asymmetric investing. This investment strategy takes a calculated approach to market volatility to find trades which offer far higher possible returns than losses – in short, he looks for investments which are more volatile to the upside than the downside.

If you would like to attend the ‘Meet the Fund Manager’ session and have an opportunity to ask Kenny questions live, you can book here.

Kenny and the team at Arnott Capital manage Arnott’s Opportunity Fund. Since 2013 it has delivered annualised returns of 22.15% – roughly three times the 7.31% notched up by the MSCI World Index.

And the Arnott’s fund’s average return during only the down months through that period remained positive at 2.43%, while the MSCI index’s average came in at -3.27%. This performance has been underpinned by Kenny’s focus on finding asymmetric opportunities in global markets, seeking to invest in assets which will exhibit higher upside volatility and lower downside volatility.

 

“None of us really mind upside volatility, its downside volatility that upsets investors” Kenny told Reach Markets. “The reason I think asymmetric investing is so intuitive to all of us is that none of us are really that concerned about volatility, what we’re concerned by is downside volatility,” he added. 


Arnott Capital uses a four-step process to shape its portfolio, beginning with identifying asymmetric themes which favour upside volatility, then investing in the best stocks within those themes, next focusing on macro drivers for risks and opportunities, to generate an asymmetric return profile for the fund.

Some of the themes he’s looking at currently include:

  • Uranium – The yellow metal’s price soared earlier in the year as demand increased and producers went from oversupply to undersupply.; and
  • Hong Kong – Political posturing has prompted some investors to wash their hands of the disputed territory, but the regime change could offer up some gems.

Kenny will share his insights on finding asymmetrical opportunities and how to use market volatility to pick winners in what’s sure to be a riveting discussion.

If you would like to attend the ‘Meet the Fund Manager’ session and have an opportunity to ask Kenny questions live, you can book here.

 

Past returns do not reflect future returns.

 

 


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