Kestrel was founded in 2009. Its new global portfolio aims for growth by investing in a range of asset classes, both directly and through fundsincluding exchange traded funds. It can invest in listed equities, bonds, property, commodities, private equity, derivatives and cash. It is also likely to hold absolute return and long/short equity funds.
The portfolio is managed by Kestrel co-founders John Ricciardi and Max Royde. Ricciardi was previously head of global asset allocation for Iveagh. He founded Bullrun Financial, a provider of quantitative strategies for institutions and advisers and co-founded Cursitor Management, one of the first firms to offer top-down, global asset allocation to institutions. This was sold to Alliance Capital in 1996 and Ricciardi then became head of global asset allocation for AllianceBernstein. Royde previously spent 10 years at KBC Peel Hunt, specialising in smaller quoted companies.
Ricciardi created the statistic-based dynamic asset allocation technology on which the new portfolio is based. The new portfolio will use the sixth version of this tool, which allows asset allocation to be made globally based on the relative levels of risk across asset classes, as these change over time.
The company believes that because the level of risk for each asset class does not stay the same throughout the market cycle, investment portfolios also need to be dynamic. The intention is the portfolio does not contain too much risk when equity markets fall, so that capital is preserved. But there is also the need to have enough risk in the portfolio to provide decent returns when markets rise. To achieve this, the fund’s risk level is adjusted based on expected market movements for the forthcoming quarter, using the asset allocation tool. As a result, the investment team should always have a good idea of the expected risks and returns of the portfolio.
Ricciardi’s management skills and asset allocation technology have been tried and tested during all market conditions over three decades, which may inspire confidence among IFAs. However, dynamic asset allocation may not appeal to advisers who are worried about the impact that timing could have on the overall risk of the portfolio.