Alpha Through Analysis
MBS Mantra, LLC ("MBS Mantra") is an CT Registered Investment Advisor and is certified as a Minority Business Enterprise by the State of Connecticut.
Philosophy and Process
The foreward to a National Geograhic publication on ‘100 Scientific Discoveries that changed the world’ offers much insight into our philosophy and process. In it, discussing the history of science, Timothy Ferris writes: “..big ideas came to be regarded as the providence of big thinkers. These intellectuals, as they were called, contributed valuable insights but seldom discovered or invented anything….Pioneering scientists like Galileo, Gilbert, Harvey and Newton had little use for scholarly analysis of venerable opinions...They were more apt to agree with Francis Bacon...who likened his Cambridge professors to ‘becalmed ships; they never move but by the wind of other men’s breath.’ ... The scientists preferred to find new facts…their points of reference came less from reading old books than from experimentation and observation.”
At MBS Mantra, we apply a scientific process of inquiry to finance and economics, preferring to revalidate what is accepted and “known”, and choosing to conduct our own exhaustive analyses by building on first principles in economics and finance. We do not blindly accept or apply theory, but rather allow the facts and the data to either validate theory, or lead us down a path of inquiry to create new thinking and theory. Our systematic process of analysis informs our understanding of Beta, and allows us to identify Alpha – ‘Alpha Through Analysis’.
We have long combined the study of money supply with bond valuation, with much success, and have over the years identified many sources of Alpha in the MBS markets. Many of our historical Analyses, going back to 1988, are found on our website, and there are numerous examples where the markets have taken from years to decades to learn what we had already discovered.
MBS Mantra provides unique investment opportunities and solutions for family offices, trusts, foundations, endowments and other institutions.
MBS Mantra seeks to solve three major problems that investors face today: low yields, highly correlated and leveraged assets with high Betas and cross correlations, and a fundamental structural flaw in Fixed Income Asset Management. Our primary strategies are thus Low-Beta strategies with High-income and Alpha, with high Sharpe ratios.
Our Flagship MBS Absolute Return Strategy offers portfolios with High Alpha and Low Beta with most asset classes, and is a solution to the first 2 problems. This strategy invests primarily in MBS, using proprietary processes to directly target portfolio total return and create Alpha, based on our understanding of the cycles of bond total returns. We thus create portfolio returns that are more stable than the returns of individual bonds, with a historical Sharpe ratio of 2. This strategy has been developed and in use for over 25 years. We currently offer access in Separate Accounts.
We have partnered in a new proposed Hedge Fund - Standard Value Equity + Income - to similarly generate Alpha with low Beta to markets. This is a fundamental, systematic US Equity beta neutral strategy, where a slice of the long equity position is replaced with our MBS portfolio strategy. This unique combination improves the historical Sharpe ratio to 4 while using less leverage and turnover than typical market neutral strategies. We aspire to target a 0 beta portfolio, as the Alpha in the various legs of our portfolio generates sufficient income and return to support a conservative approach to asset allocation and portfolio construction.
We also have other strategies to improve Alpha and reduce Beta that can be customized to solve specific client portfolio problems. An example is our Agg Plus Alpha strategy that optimizes portfolios of Fixed Income Funds to outperform the Bloomberg Barclays Aggregate Index.