Adaptive Strategies for Evolving Markets
The philosophy that informs the development of all of AlphaSimplex’s strategies is based on the Adaptive Markets Hypothesis (“AMH”). An innovative theory of market behavior, the AMH recognizes that financial markets are neither always efficient nor always rational, but that they are highly competitive and adaptive. As a result, market conditions are ever-changing; market volatility, risk premia, and cross-asset correlations are not static. The implication is that investment strategies must continuously adapt as markets evolve in order to deliver more consistent performance.
Standing apart from the competition
AlphaSimplex believes that quantitative investment strategies that start from an assumption that markets behave according to a fixed set of rules (e.g., factor-based linear models) share a critical weakness: the factors are often static. As a result, quantitative models are often criticized for being too easily surprised by—and slow to react to—sharp and non-linear market movements. In contrast, AlphaSimplex designs models recognizing that financial markets are highly competitive and adaptive. AlphaSimplex’s models incorporate innovative statistical techniques for dynamically weighting multiple models to adapt to different market conditions, factors, and time horizons.
What we believe
Financial markets are highly competitive and adaptive
Risk premia, market volatility, and cross-asset correlations will vary over time
A disciplined approach to risk management can help investors stay invested over the long term
Combining multiple assets, time horizons, and models can increase the diversification of a strategy