Our Investment Approach
Launched in 2006, AAIM’s strategies through funds and portfolios had EGP20 billion in assets under management at end of December 2022. Driven by both organic and inorganic growth, we successfully managed to deliver consistent performance through various market environments while protecting capital and controlling volatility.
Within the Egyptian market, there are two main asset classes that we can tap into, namely equity and fixed income. Let’s walk you through our investment approach in each asset class.
Equity Investments
- Our primary focus is wealth creation by capitalizing on opportunities through a sector-agnostic approach across the whole investable universe on the Egyptian Exchange.
- Our performance is driven by our superior stock selection methodology with a long-term investment horizon, using both qualitative and quantitative data-driven, in-depth analysis.
- Our goal is to maximize our investors’ wealth by merging (a) strategic asset allocation (through rigorous fundamental research) with (b) tactical asset allocation (through opportunistic trading) to identify and execute high-conviction investment opportunities.
We focus on companies whose stocks are undervalued with the following criteria:
- Solid business models.
- Strong management track record.
- Healthy operating cash flows.
- Outstanding dividend-paying capacity.
- ESG (environmental, social, and governance).
We build our in-house valuation models to determine the underlying intrinsic value of target companies along with different scenario and sensitivity analyses.
- We do not attempt to time the market, but we set our equity exposure according to prevailing market, economic, and political conditions.
- We employ momentum trading to adjust our equity exposure, accumulating when the market is in an upward trend and reducing after we think it has peaked.
- Depending on each mandate, we allocate within sectors/companies that offer the highest risk-adjusted return profile and strive to be better than the competition.
- Our investment committee meets periodically to reassess our target asset allocation based on our predetermined investment guidelines.
- We revisit our assumptions and fine-tune our forecasts regularly after conducting company visits and meeting with companies’ management teams.
- We monitor companies’ developments closely to detect any deviation away from our established views or estimated fair values.
Fixed-Income Investments
- Our primary focus is capital preservation and income generation by identifying mispriced securities and combining them in a broadly diversified portfolio of fixed-income and money-market instruments.
- We have a long-term investment horizon, utilizing both qualitative and quantitative information derived from broad as well as in-depth analyses.
We select our investments in the market based on relative mispricing given a multitude of factors, including:
- Geopolitical developments (event risk).
- Economic developments (inflation risk).
- Credit quality (credit risk).
- Market demand and supply (liquidity risk).
- Yield curve risk (interest rate risk).
- Term structure of interest rate volatility.
- Term structure of credit spreads.
We employ in-depth economic and risk analyses that consider:
- Economic outlook.
- The Central Bank of Egypt’s employed policies.
- Yield curve forecast.
- Duration risk.
- Reinvestment risk.
- Default risk.
- Credit spread risk.
We build our in-house valuation models to determine the underlying intrinsic value of target fixed-income securities along with scenario and sensitivity analyses.
- We construct our fixed-income portfolios based on our target asset allocation that takes into account risk tolerance and security selection.
- In terms of risk tolerance, we consider:
- Target portfolio duration.
- Comparative analysis.
- Yield curve positioning.
- In terms of security selection, we consider:
- Issuer credit outlook.
- Historical yield comparison.
- Our investment committee meets periodically to reassess our target asset allocation based on our predetermined investment guidelines.
- We revisit our outlook depending on new information from the market or the issuer.