Safanad’s investment philosophy combines stable earnings and liquidity, with high risk-adjusted return investments. At its core is a risk-based investment discipline.
Our approach is founded on the following convictions:
- Adverse market events occur with increasing regularity and severity.
- Risks that can result in significant loss of capital must be avoided completely.
- A disciplined investment methodology which evolves to reflect changing circumstances is key to mitigating such risks.
- A clear investment plan, that contemplates possible courses of action under adverse, albeit unlikely, circumstances, improves risk management throughout an investment lifecycle.
- Maintaining adequate liquidity provides the ability to withstand market shocks, and to take advantage of associated market opportunities.
We address these issues in three fundamental ways:
1. Being Prepared
At the heart of risk management is the ability to implement an investment plan to reduce or eliminate risk should events unfold in an adverse manner. Therefore liquidity, and sustainable liquidity under a variety of market conditions, is central in our risk allocation discipline.
2. Risk-based Position Sizing
Ensure that positions are sized to reflect both downside risk and liquidity constraints is critical. We take great care to measure these variables and the events that would impact them in order to size accordingly and we track to ensure timely risk and exposure management.
3. Effective Diversification
Diversification is an elusive concept. We take great care in testing the efficiency of portfolio diversification under stressed market conditions. We aim to ensure that this is maintained through periods of dislocation and changing liquidity conditions.
The purpose is to build portfolio exposures that can withstand adverse conditions, that reward our stakeholders appropriately for the associated risks taken, and that enable us to capture value as opportunities present themselves.