Our Investment Methodology
From Our Chief Investment Officer…
Ariel Yusim, CFA
We set out to build the product that ultimately, we ourselves desperately wanted. We asked ourselves the question: Why can’t I have the impact I want and still get market performance?
We’re proud of the solution we’ve delivered to this most simple of questions. It turns out that answering this simple question requires a sophisticated and thoughtful approach, and we summarize it below.
At a glance: How Recap Builds Portfolios
At the heart of Recap’s methodology lie two of the most important trends in investment management over the last 20 years. These are Factor Investing (a.k.a. Smart Beta) and the incorporation of an ESG mandate. Sophisticated methods of applying both to portfolios is the focus of our research and how we differentiate ourselves from other asset managers.
Our research focuses on generating efficient and highly diversified portfolios with ESG mandates.
Sustainability-based or ESG mandates are a fundamental pillar of our process, but despite the common misconception, these should not necessarily come at the expense of performance. Our research focuses on generating efficient and highly diversified portfolios with ESG mandates. We go beyond that by allowing investors to select the impact areas that are most meaningful to them, with the end goal being portfolios with personalized impact and market-like performance.
At Recap, we look at each company as a potential building block for that portfolio. Our methodology begins with our brand promise, the Recap Badge. We make sure that companies meet our minimum bar for ethical and governance standards and eliminate those that don’t from our tradeable universe.
After this step, we take into account each stock’s potential risk and return based on fundamental financial characteristics, as well as its ESG profile. At this step, we concurrently perform our proprietary Sustainable Impact measurements mapping each company’s activities to our impact areas, which broadly align with the United Nations Sustainable Development Goals (SDGs). Using this information, we put it all together using our in-house optimizer algorithm whose output is portfolios that can meet several objectives such as performance, diversification, benchmark tracking, exposure to Smart Beta factors, ESG characteristics, and measurable impact improvements.
This is one strategy that we’ve developed: ESG leaders with Climate Action impact preference.
This strategy seeks to attain market-like returns while investing in a portfolio of ESG leaders, while at the same time, delivering a minimum 20% improvement in our ‘Climate Action’ impact area. For more information on our impact areas, please see here.
Recap is a sustainable investing platform that enables you to easily invest in companies that share the same environmental and social values as you.
Recap Investing Inc. is an SEC-registered investment adviser.
Brokerage services provided to clients of Recap Investing Inc. by Interactive Brokers LLC (https://www.interactivebrokers.com). Interactive Brokers is a member NYSE - FINRA - SIPC and regulated by the US Securities and Exchange Commission and the Commodity Futures Trading Commission.
Investments in securities: Not FDIC Insured • No Bank Guarantee • May Lose Value.
All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. Historical returns, expected returns, and probability projections are provided for informational and illustrative purposes, and may not reflect actual future performance. Before investing, consider your investment objectives and Recap's fees and applicable custodial fees.
Recap's performance is hypothetical and does not represent the investment performance or the actual accounts of any clients. The securities in the hypothetical portfolio were selected with the full benefit of hindsight, after their performance over the period shown was known. The results achieved in our simulations do not guarantee future investment results. The model performance information is based on the back-tested performance of hypothetical investments over the time periods indicated. “Back-testing” is a process of objectively simulating historical investment returns by applying a set of rules for buying and selling securities, and other assets, backward in time, testing those rules, and hypothetically investing in the securities and other assets that are chosen. Any comparisons to indices are provided for illustrative purposes only.