We do one thing and one thing only - Global Multi Asset Management. Our investment philosophy is unashamedly simple, "diversification through unconstrained global asset allocation within an absolute mindset". We also adopt a multi manager bottom up process where we; either utilise low TER beta funds such as Exchange Traded Funds (ETF's), access exceptional investment talent or alpha generators in all asset classes and access the vast array of alternative strategies, incl hedge funds and private equity.

Strategic Asset Allocation or big picture long term super cycles are very important to us at MitonOptimal. Historical studies of deflation / reflation / runaway inflation / disinflation have shown that for any one of these cycles a very different benchmark strategic asset allocation is required for income and growth. Global equities by way of example have outperformed cash and bonds over the very long term but we have experienced deflation and runaway inflationary periods of 15year + periods where equities have produced negative returns. Conversely commodities typically have boom bust cycles based around these big picture cycles and population demographics. In the 1980's and 90's equities roared whilst gold slipped from $800 per ounce to $250. In the next 10 years gold has produced a five bagger return and global equities have produced a negative result. All this makes the big picture strategic asset allocation very important over the long term.

Risk models for volatility must include data from the past 100 years to include as many possible economic cycles and avoid black swan events.



In addition we are active tactical asset allocation managers who attempt to focus on absolute not relative returns through different liquidity cycles. We are not constrained by benchmarks or tracking errors, nor are we index based, as we aim to provide positive returns by managing downside risks. We follow and use the following tools within our tactical asset allocation framework

1. Lead indicators of global business cycles
2. Independent Liquidity and central bank analysis over interest rate cycles
3. Various sources of fundamental macroeconomic research
4. Proprietary asset class valuations - both relative and within asset classes
5. Technical analysis, internal and external

Research and actual attribution analysis leads us believe that these two asset allocation components, whilst very different, provide greater than 90% of our returns. We therefore spend 90% of research time and budget focused in this area. Diversification is key to our portfolio construction but correlation between asset classes can change dramatically over time, therefore one must very cognizant of when correlations can move to 1 and therefore provide little diversification benefit as opposed to when each reverts to its mean.

Multi Asset Management in the new normal world of low income yield and growth makes the decisions of where to be at what time, even more critical than before.



Finally, fund or security selection should not be belittled. Whilst it provides 10% attribution if everything is done correctly, mistakes in this part of process can be very costly, especially in the less liquid or leveraged asset classes. Additionally, our underlying managers provide an important input into our asset allocation process about their areas of expertise, via our regular interaction and feedback.

Quantitative and Qualitative research is vital to ensure that the bottom up part of the process is executed correctly. Alpha or fund manager skill and outperformance of indices / benchmarks by our underlying equity, bond, property, commodity or alternative managers must be separated from beta or market returns. Access to beta has become much more cost efficient and effective in recent years due to quantitative ETF funds and one should avoid paying too high a fee for closet indexation.

The following is very important to us at MitonOptimal when looking at fund / security selection

1. Tracking error and Counter party risk on all Exchange Traded Fund (or notes)
2. Rolling information ratios on all active alpha managers ie added return for risk taken on a rolling three year basis to establish trends
3. Investment Trusts / Closed Ended Funds for discounts to NAV and special situations
4. Liquidity and operational due diligence on all alternative strategy funds and managers
5. Structured Products for idea implementation
6. Qualitative meetings and reviews for all underlying managers

In summary, we are looking for funds and listed securities that outperform on the upside when we invest based on an asset allocation call and not necessarily in down markets or through all cycles which makes us very different to a traditional multi manager business.

Risk Management and dealing procedures is key to our philosophy at MitonOptimal. As an owner managed business, the ultimate risk management function is carried out by each fund manager on their own peers rather than an overreliance on highly complicated computer generated models. We have regular formal and informal investment committee meetings as a team which ensures full review of each portfolio and independent valuations / custodianship for valuation purposes. All dealing is signed off through an independent dealing desk with strict compliance and oversight rules, not by fund managers.

Full discussion about investment strategy within each asset class is available in the in depth analysis of each fund.