The ABC Demo Fund adopts a meticulous and strategic approach to opening positions within its portfolio. This process is governed by a rigorous evaluation of potential assets and a collective decision-making framework, ensuring alignment with the fund’s overarching investment strategy and objectives.
Selection from Candidates
Candidate List: Potential investment opportunities are initially shortlisted based on a predefined set of criteria, forming the candidates list.
Risk-Reward Analysis: For each candidate, a detailed Risk-Reward ratio is calculated. This analysis forms the backbone of the decision-making process, assessing the potential upside against the inherent risks of the investment.
Portfolio Committee Voting: The final decision to open a position is made through a voting process by the Portfolio Committee. This ensures a democratic and balanced approach, leveraging the collective expertise of the committee members.
Position Opening Triggers
New Regular Investments: As the fund receives regular inflows through its Dollar-Cost Averaging (DCA) model, these funds are allocated to new positions as per the strategic investment plan.
Closing or Rebalancing: Positions may also be opened by reallocating capital from closed positions or through the rebalancing of existing assets in the portfolio. This dynamic adjustment is key to maintaining the desired risk-return profile.
Pre-Opening Requirements
Investment Thesis Formation: Before any position is opened, Portfolio Managers are required to formulate a comprehensive investment thesis. This thesis must articulate:
- The rationale behind selecting the asset.
- The asset’s expected role and contribution to the portfolio.
- A clear understanding of the underlying technology, market dynamics, and growth potential.
Exit Strategy and Conditions: Concurrent with the investment thesis, Portfolio Managers must define the conditions under which the position will be closed. This includes:
- Target returns or specific milestones.
- Risk thresholds or unfavorable market conditions.
- Timeline for holding and potential triggers for early exit.
Ongoing Monitoring and Review
Performance Tracking: Once a position is opened, its performance is closely monitored against the initial expectations and market dynamics.
Adaptive Management: The Portfolio Committee remains agile, ready to make adjustments based on evolving market conditions and the performance of the asset.
Conclusion
The ABC Demo Fund’s approach to opening positions is characterized by disciplined evaluation, collaborative decision-making, and strategic foresight. This methodical process ensures that each investment aligns with the fund’s long-term goals, risk appetite, and the dynamic landscape of the web3 sector.