The investment process combines quantitative based stock selection with an ongoing qualitative verification of stock signals. The underlying quantitative model is based on identifying undervalued stocks of good quality and with good momentum and the qualitative verification ensures there are no unintended risks associated with the holdings.
The core of the investment philosophy is the belief that the combination of a quantitative model that is built on the principles of fundamental company analysis and qualitative verification of the model output, makes it possible to outperform the market.
The quantitative model makes it possible to oversee a universe of several thousand companies in a structured and rational manner. However, the model may not fully reflect current news flow and the risk of “false positives” which is why a qualitative verification is needed.
Nykredit Asset Management has a stock picking approach to Danish Equities. That means that we select stocks based on their isolated risk/return properties, in contrast to choosing stocks based on their marginal risk contributions, for example expressed by beta. Of course, this does not preclude using total portfolio risk measures. For example, one can restrict portfolio sector composition, tracking error, or the like, and while we do monitor the traditional portfolio key ratios, these do not govern the portfolio composition.
Risk is central when we evaluate each single investment opportunity but our risk assessment is always based on a bottom-up analysis of the company internal factors.