The strategy aims to achieve the highest possible continuous value increase, taking into account the security of capital and the liquidity of the investments made.
The strategy follows an “absolute return investment approach” with the aim of achieving a positive performance regardless of stock market performance.
In order to achieve this goal, we only invest in equities that have a positive expected, achievable return on investment in the short term.
The core of the investment strategy is a specialised, event-oriented approach (“News-Driven-Strategy”). The investment process is geared towards the automated capture and analysis of transformative news that can cause a distortion in the share price. Examples of news that can trigger significant price reactions include strategic announcements, takeovers, bankruptcy announcements, new products, patents, cooperations, surprise profit announcements/warnings or study results and approvals in the field of biotechnology.
Strategy & Selection process
The strategy bases its investment decisions on statistical analysis. An analytical approach is used to calculate an evaluation of the upward and downward potential of the event (“transformative message”) based on past responses to similar messages. The investment strategy then analyses which investment risk is associated with a potential investment. Finally, the size of the position to be entered is determined by the absolute maximum allowable loss, which is based on the yield potential, the risk of loss, the available liquidity and the risk profile of the strategy.
The strategy invests globally regardless of index affiliation, industry, market capitalization or region. The decisive factor for an investment is always a risk-adjusted, positive short-term return expectation.
The focus is on investments in US equities, as this is where the liquidity, number of messages and efficiency of message processing are greatest.
The event-driven approach to investment results in numerous and new investment opportunities every day.
In order to benefit from falling prices even in the event of negative news, short selling can be made on shortable US stocks.
The diversification of the portfolio results from the combination of a relatively large number of investments combined with a short holding period. 95 percent of the investments have a maximum holding period of 1 day.
The weighting per individual share is usually 3 to 5 percent of the invested capital. With very strong signals, up to 10% of the invested capital can be bought by a single security (e. g. in the case of a takeover). Short selling of US shares is limited to 5% of invested capital.
The maximum allowable loss per trade is set at the time of the investment and implemented by hedging measures in the form of stop-loss prices.
In exceptional situations, the cash ratio for this strategy can be up to 100%. This may be particularly the case in the event of exceptional market movements or insufficient signals.
The shares selected for this strategy are continuously analysed and monitored. This monitoring process is ongoing and automated, as increased volatility is expected from the news. Positions are monitored in real time based on statistically calculated algorithms and closed at an optimal profit/loss ratio.
If certain predefined stop-loss levels are reached, the position is automatically closed. Winnings are typically closed automatically at the end of the trading day or when certain predetermined targets have been reached.
Furthermore, the goal is for the algorithm to generate a maximum of 5% more trades per year, depending on their “learning curve” of profitable trades from previous investment years. This means that up to 5% more trades can be realised per year if the software generates appropriate profitable investment signals.
Thus, we give the algorithm “space” to learn and gradually expand the investments without the human factor intervening in the Tactical Asset Allocation manually.
This is one of the main differences to traditional portfolio management. We completely replace the subjective human component in the analysis and decision-making phase with an objective, data-driven approach to outperform traditional asset managers.
Compliance with ESG criteria (Environmental, Social, Governance) for a sustainable investment strategy
Sustainable companies often operate in dynamic growth markets with good prospects and a good opportunity-risk profile. The reasons for this are obvious: Sustainable investments thus participate in the shift in social awareness towards more global responsibility and climate protection. In addition, sustainable capital investments have fewer systemic or reputational risks in their business model due to their focus. The prerequisite for this is that risks are appropriately managed and investments are carefully selected. However, this asset management strategy does not focus on explicit ESG compliance or only takes ESG criteria passively into account. The investment process for this strategy is based on the sustainability approaches of ETF providers when selecting financial instruments and on individual companies when investing in equities. Inno-Invest does not carry out its own research on compliance with the ESG criteria. However, it is a matter of course for us to act in accordance with the objectives and investment wishes of our clients when managing assets. Therefore, we act according to three self-imposed approaches:
Best-in-Class-Ansatz: Exceptional investments in the consideration of alternatives in those companies in a sector that are particularly sustainable.
Exclusion approach: Exclusion procedures for controversial companies or industries, e. g. renouncing investments in areas of animal testing or excluding relationships with countries with human rights violations.
ESG integration: investment decisions based on sustainability aspects that can contribute to a company’s long-term development. For example: investments in specific ESG investment topics for a sustainable development of society and the environment, in companies whose products and services have a positive impact on society and the environment and contribute to solving global challenges.
Notes from the portfolio manager
Investors in this strategy should be aware that, although over time, this is a broadly diversified but speculative approach compared to other asset management strategies offered by Inno-Invest. By acting in the short term and taking advantage of market opportunities through news, the aim is to achieve higher performance than conventional asset management strategies. Speculative growth opportunities for an investment can also be used in the selection of titles and short sales can be made in case of negative news. Therefore, any investor in this strategy should consider combining this strategy with a more conservative ETF variant in parallel, depending on the risk appetite or risk character, in order to mitigate or mitigate potential price risks.
Risks in investment
The investor in this strategy should be aware that any investment involves risks. The decisive factor here is the personal risk profile, the personal risk aptitude and acceptance, which can only be assessed objectively and self-critically by the investor. This more speculative strategy must therefore be matched by more risk-taking than a more conservative asset management. In addition, every investor should ask himself what time horizon he wants to invest in this strategy. For investors, the investment timeframe should not in principle be of a short-term nature. (Risikohinweis).
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