Investment Criteria

Markets may defy portfolio manager’s logic and there must be some measure not to fight the market obstinately either on the downside or on the upside.

Downside Surprises: Stop Loss / Portfolio Insurance
On the downside, an asset class or stock may under-perform against expectations. In this case, gradual stop loss schemes must be followed (reducing position to an acceptable level as it moves out of the money) in order to limit downside.

Upside Surprises: Partially “Tagging Onto the Market”
Conversely when an asset class performs against expectations the fund may prefer to participate to a limited extent.

When positions are built up or liquidated in an asset class or specific stock, a gradual approach is generally preferred (unless there is time pressure due to imminent news release etc.) whereby positions are gradually built up as the the trade moves “in the money” and gradually reduced when the stock approaches its potential.