Cougar Global has developed a unique approach to global investing based on its Multiple Economic Scenario Outlook (MES), using a one year forecast horizon.
The investment process incorporates leading edge research into the behaviour of capital markets and global asset classes in order to determine how they will behave under various macroeconomic scenarios.
The first step is to research, analyze and model the probabilities that the consensus attaches to each scenario (rational beliefs).
The second step is to establish Cougar Global’s own probabilities for each scenario, based on its own research, obtained from independent macroeconomic, capital market and geopolitical research services (Cougar Global’s MES).
The third step is to generate probability distributions for the returns of each asset class over the next year (an advanced statistical sampling technique where the computer randomly samples the data for each scenario). The data is then “bootstrapped” and then weighted according to Cougar Global’s Multiple Economic Scenario Analysis. This provides Cougar Global with a measure for how these asset classes would behave under the forecast scenarios.
The results are then entered into the proprietary portfolio optimizer in order to generate the optimal asset mix for each mandate, for that month. This is when we incorporate downside risk management techniques to control risk levels for each portfolio. Portfolios are revised monthly and rebalanced if the expected returns and downside risk for the current mix have shifted.
For more details about the Multiple-economic Scenarios, please see “5 Macroeconomic Scenarios”.