The Alpha Fund employs a systematic long/short equity strategy that goes long stocks that have the market and financial (accounting)
“This was a monumental research task,” says Principal and lead researcher, John Gregory. “While all fundamental investors have a set of criteria they use to decide which stocks to buy or sell, we wanted to come up with a strict, quantitative definition of which characteristics describe a good long or a good short. To determine the characteristics that matter and when, we developed a proprietary database of company-specific calculations and then examined the performance of portfolios formed using more than 100,000 combinations of stock characteristics. Our only requirement was that the ultimate strategy be tradable in the real world. With the characteristics that forecast stock returns now identified, we can use them to systematically evaluate all tradable stocks.” The results of the research both confirmed many of the findings reported in the academic literature and uncovered numerous factor combinations that generate significant return that had not been reported previously.
The fund’s managers believe that the G.O. Research & Trading Alpha Fund affords investors a number of benefits:
• High Average Returns: Historically, the strategy produced returns net of fees in excess of 20% per annum. Actual trading results have been in line with history.
• High Risk-Adjusted Returns: The fund currently ranks in the 92nd percentile of the Morningstar Altvest Long/Short Equity category for risk-adjusted return YTD.
• Low Beta on the S&P 500: The Alpha Fund’s strategy chooses stocks that most analysts and investors are not focusing on. The performance of portfolios formed using these stocks generate returns that are uncorrelated with the overall market at longer time horizons and have low correlations with the market over intermediate time horizons.
• Rigorous Strategy Definition: The Alpha Fund invests through the consistent application of time-tested strategies to generate high risk-adjusted returns. This allows investors to know what they are investing in and eliminates style-drift concerns.
The G.O. Research & Trading Alpha Fund’s performance since inception has been in line with the strategy’s historical performance. Gregory commented that, “The Alpha Fund’s strong returns and low volatility to date affirm the research findings and demonstrate the strategy’s tradability.”
