Direct Equity Investment Strategy | Portfolio Creation | Risk and Return Analysis

Business need

  • A UK-based commercial bank wanted to develop a systematic strategy to make direct equity investments.
  • The client followed a core-satellite approach to investing, so the percentage of direct equity investments within the total portfolio was very small.
  • The bank wanted to minimise the time and resources spent analysing individual stocks.

To develop a systematic investment plan (SIP) strategy for direct equity investments.

The client outlined two key reasons for selecting RocSearch:

  • Our experienced strategic and financial advisory team with wide exposure to equity investments.
  • Our extensive experience in guiding investors with portfolio creation strategies.

Approach and Methodology

  • We devised a strategy based on the holdings of active funds screened on the basis of their performance over a specific period. Based on this strategy, we created a hypothetical portfolio for the client for each quarter for the last decade.

RocSearch developed a strategy based on the active fund performance and created a hypothetical quarterly portfolio, which outperformed the index on risk and return.

  • We then assessed the likely performance of the hypothetical portfolio versus the benchmark.
  • The findings revealed that the hypothetical portfolio created through our strategy outperformed the broader index significantly over long periods on risk and return measures.

Business Outcomes

  • The client approved the strategy for its direct stock investments.
  • The client has been deploying this investment strategy since Jan 2021 for all the direct stocks.

The client has approved the strategy for its direct stock investments and has been actively deploying it.

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