Investment Strategy
The overriding investment strategy utilized by ECAM is based upon the concept of Absolute Return Performance. Many small investors are unaware of the different investment strategies available but it is essential these different strategies are well understood.
Relative Return Performance
The majority of investment funds offered by most mutual fund companies worldwide (including those within the Emirates Group Provident Scheme) are based upon the concept of "Relative Return" performance.
These types of funds are typically ones whereby the fund is established, managed and valued relative to a benchmark identified when the fund is first conceived. The fund managers will select a chosen benchmark (for example the S&P 500 Index, the MSCI World Index, a 60/40 Equity/Bond balanced portfolio, etc.) and then design & manage a portfolio such that they attempt to outperform the benchmark over a given time period.
Under the terms of "Relative Performance", should the benchmark return a positive rate of return over a given period of +"X" % and the fund outperform the return of the benchmark, the fund's return would be considered "relative outperformance". However, if the benchmark returned a negative rate of return over a given period of -"X" % and the fund again outperformed the return of the benchmark but still returned a loss for the period, the fund's return would still be considered "relative outperformance" with the fund still having lost money.
Consider the following examples:
Example 1:
-Yearly benchmark return ("X"): +10%
-Yearly portfolio return ("Y"): +11%
*Portfolio Relative Outperformance: +1%
Example 2:
-Yearly benchmark return ("X"): -20%
-Yearly portfolio return ("Y"): -19%
*Portfolio Relative Outperformance: +1%
In example 1 the portfolio outperformed the benchmark by 1% and produced an annual return of +11% within the account. In example 2 the portfolio outperformed the benchmark by the same 1% annually (as previous) but produced a loss of -19% within the account.
The relative return portfolio manager would quantify each of these outcomes as equally successful as the "Relative Outperformance" he created was the same in both scenarios (but in example 2 you still lost 19% in your account).
Absolute Return Performance
An Absolute Return manager is one whereby the only thing that counts is "Absolute Return" or "money in the bank". Success is not measured against a benchmark; it is strictly judged upon delivering positive rate of return over a given period of time.
ECAM endeavors to deliver absolute return utilizing a combination of economic, fundamental, sentiment and technical analysis with tactical allocation of capital into risk averse investment vehicles as market conditions become hostile.
ECAM's overriding principle is Absolute Return with Capital Protection.