The investment philosophy of Maru is to offer a unique product that enhances an index by combining with it with valuation based approach. We blend active management using bottom-up company specific fundamental analysis to extract alpha from the large cap securities and passive management by weighting the remaining securities relative to the index, constantly remaining sector neutral.
We aim to generate alpha by consistently outperforming the clients’ selected benchmark. We maintain index like risk parameters with low dispersion around the benchmark, at relatively low cost.
Maru is committed to building long term wealth for our clients, we therefore take a long term view (three years or more) on our investment decisions based on sound fundamental research on listed stocks. We are aware that decisions implemented today may only bear fruit over several years in the future. The intention is to improve member benefits at retirement.
1ResearchBefore we begin to build the portfolios the analysts evaluate companies based on a meticulous proprietary bottom-up fundamental research process using market yield, normalized earnings and ratings, and analyst’s judgement on companies in order to estimate the intrinsic value.
Based on their valuation the earnings are normalized to generate a risk adjusted total expected return. The shares are then ranked according to their highest risk adjusted total expected return (securities that offer more value relative to their intrinsic value) to their lowest (securities deemed to be expensive in value relative to their intrinsic value).
2Portfolio constructionWe optimise the large capitalisation stocks by:
• Over or under weight stocks relative to their intrinsic value
The remaining shares in the benchmark are then passively weighted relative to the index weight. This process allows Maru to tilt the portfolio towards a valuation bias, allowing us to extract alpha from the large cap securities.
3Risk ManagementQuantitative risk management systems are crucial to optimal investment management. We have implemented strict investment restrictions to ensure mandate compliance. The maximum permissible weighting in the enhanced portion of the fund is calculated using an algorithm that indicates the level of over / under weight position per security, remaining sector neutral at all times.
In addition a hard limit per security is used as another risk control measure. With these risk measures in place we are able to remain within our tracking error limits and investment objectives.