NEO RISK
REAP ASIA
EQUITY FUND
Neo Risk REAP Asia Equity Fund (“the Fund”) is a Cayman-domiciled open-ended fund.
The Fund’s investment objective is to generate superior risk-adjusted returns for investors versus a broad Asia ex-Japan equity benchmark index under a range of market conditions. The Fund achieves its investment objective by focusing on managing realized risk and limiting potential drawdowns to a risk level that is optimal for target investors.
The Fund’s targeted volatility level is approximately 10%, or 60% of historical realized volatility for broad Asian equity benchmark indexes, with an anticipated target return approximately 200-400bps higher than the benchmark index.
INVESTMENT
PHILOSOPHY
We take an innovative approach to investing that focuses on risk management to deliver superior investment results. Our approach enables us to construct investment portfolios that are resilient in volatile markets; our aim is to control risk and limit losses when markets are weak.
We use a variety of tools that are grounded in academic research but have been tested in the real world to measure, monitor and manage risk actively, including quantitative risk modeling, advanced asset allocation and derivatives.
Our approach enables us to construct investment portfolios that are resilient in volatile markets; our aim is to control risk and limit losses when markets are weak. The approach is well-suited to the current market environment where high and potentially volatile equity and bond prices globally have left investors vulnerable to rising interest rates, necessitating dynamic management of portfolio risk.
INVESTMENT STRATEGY
The Fund uses a proprietary risk-focused core investment strategy to determine optimal allocations to the benchmark index, enhanced by hedged exposure to index factor risk premiums using an active, risk-based signaling process. The risk premiums are constructed to diversify risk relative to the benchmark.
The Fund invests in Asian equities, equity and credit indexes directly and/or through ETFs, swaps, derivatives, and other suitable instruments for its primary investment exposure; the Fund also invests in a variety of fixed income instruments as a means of controlling investment risk.
RISK MANAGEMENT
Risk management is central to the Fund’s investment process. The core investment strategy utilizes a proprietary risk-based model to determine optimal allocations to the benchmark index, with a goal of realizing a target risk level for the Fund of approximately 60% of historical benchmark volatility. Risk is monitored continuously, though trading only occurs when a model rebalance is required.
The index factor-based hedge overlay, credit diversifiers and duration hedges are also designed to diversify risk versus the benchmark index. The result is a portfolio that is benchmark-correlated (beta approximately 0.30), but with dramatically lower risk and drawdown exposure.
Cimate Related Risks:
Management assesses climate related risks in its investment portfolios. Where such risks are determined to be i) relevant and ii) material, management monitors and manages such risks on an ongoing basis.
When assessing climate related risks, management considers the following factors:
i) Investment strategy;
ii) Diversification of assets; and
iii) Sector concentration.
