Picton Mahoney Asset Management  



Investing alongside clients and entrusted with billions (CAD) in client assets, Picton Mahoney Asset Management (PMAM) is a 100% employee-owned portfolio management boutique providing thought-leading investment solutions to institutional and retail investors in order to help reach their long-term investment objectives with greater certainty. Founded in 2004, PMAM has decades of investment management experience—with its founders having pioneered momentum-based investment strategies and true style diversification as principals at Synergy Asset Management in the 1990s.

Blending art and science, the founding portfolio managers of PMAM rely on the same disciplined, consistent and repeatable process when constructing and managing client portfolios. We draw on fundamental and quantitative analysis: united in purpose, both disciplines consider similar opportunities and risk factors, but operate independently. This allows construction of diversified portfolios that maximize investors’ exposure to fundamental change characteristics, while risk remains explicitly managed.

Building Picton Mahoney’s Momentum Portfolio

A Disciplined and Repeatable Three-Step Process for Success

Fundamental change is the critical factor that provides the foundation of Picton Mahoney’s investment philosophy and process. To discover it, PMAM employs a unique combination of quantitative models and fundamental research and makes continuous use of leading technology and sophisticated controls to maximize risk-adjusted return potential for clients. It’s a three-step process that delivers results.

STEP 1
IDEA GENERATION

Picton Mahoney’s Quantitative and Fundamental Teams operate independently, providing recommendations based on their thorough assessments (and back-testing) of specific trends and fundamental change characteristics.

STEP 2
PORTFOLIO CONSTRUCTION

The Portfolio Manager takes the recommended ideas, filtering them through portfolio construction and risk control programs to identify the best opportunities (and respective weightings) for the portfolio.

STEP 3
CONTINUOUS MONITORING

PMAM monitors portfolios daily to ensure they maintain the right risk/reward balance, in keeping with stated investment objectives. Tasked with this continual oversight are the Quantitative Team, and Portfolio Managers.




Momentum – Part of a Balanced Portfolio

Picton Mahoney’s investment approach is an excellent complement for traditional value and small-cap strategies. Picton Mahoney’s research has shown that blending different investment styles/strategies together leads to higher risk-adjusted returns for investors. This “style diversification” helps smooth overall portfolio returns in the short run, while allowing investors to profit from each strategy’s longer-term performance potential.

Picton Mahoney’s Canadian and global funds can play an important role in this process for two reasons:

  1. The momentum funds tend to act much differently than more traditional strategies. This means that adding momentum to a style-diversified portfolio leads to better diversification and a smoother ride for investors.

  2. Momentum strategies have generated strong returns in the long run, which can help improve the overall returns for portfolios.

MEAN-VARIANCE EFFICIENT FRONTIER

Mean-Variance Efficient Frontier

Source: CI Mutual Funds Inc.
*Represented by Picton Mahoney’s proprietary value, growth, momentum and small cap indexes, based on monthly data from 1980 to 2000.

This chart shows the historical risk and returns characteristics of all combinations of different investment styles over a 20-year history. The “style frontiers” in the graph shows the most efficient blend of the various styles that generate the highest risk-adjusted returns. Notice that the style frontier portfolios that include momentum have historically generated significantly better risk-adjusted returns compared to those that don’t include momentum.

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