INVESTMENT STRATEGIES

Our Philosophy

Denali’s investment philosophy rests with the fundamental premise that superior long-term results can be achieved with a systematic process that eliminates cognitive biases and subjective weaknesses that negatively impact many investors.

We compare the core of our philosophy to a well understood investment principle that involves the value of networks, and more recently, social networks. For example, the value of Facebook’s platform increases as more users join and actively use the network. Our Network Value approach to investing simply means that in a stock’s case, its liquidity (or size of network) should be factored into its value and expected return forecast. Most of our peers ignore liquidity until portfolio construction. Our research shows that liquidity, or the size of the stock’s network, is a key component to its value and is often underappreciated.

What We Have to Offer

We offer institutional investors equity strategies covering value and core-oriented approaches in US Large, US Mid, US Small, US Micro, International Large Cap and International Small. Most would characterize our portfolios as ‘value’ while we would say we build high earnings portfolios with a tilt to lower liquidity. While we adhere to strict risk management rules, we believe in high conviction investing, high active share, and concentrated portfolios relative to a traditional systematic manager.

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International

Investment Objective

The Denali Network Value International investment strategy is measured against the MSCI World ex-U.S. Index, and seeks to return 3-4% gross excess above that benchmark.

Benchmark

MSCI World ex-U.S., Russell Global Developed ex-U.S.

Key Strengths

  • The fundamental equity valuation insights from Denali Advisors published and unpublished research
  • A time varying factor forecast designed to capture investment themes
  • Fundamental inputs to a systematic approach
  • Emphasis on high earning stocks that possess low (but increasing) liquidity and low market cap leads to exposure to stocks our peers may ignore

Key Data

Excess Return Objective: 3-4%, Gross of fees
Tracking Error Objective: 3-5%
Typical Market Capitalization: $10-$50 Billion
Approximate Holdings: 80-100

Investment Objective

The Denali Network Value International Small investment strategy is measured against the Russell Developed ex-US US Small/MSCI World ex-US Small and seeks to return 4-6% gross excess above that benchmark.

Benchmark

Russell Developed ex-US US Small/MSCI World ex-US Small

Key Strengths

  • The fundamental equity valuation insights from Denali Advisors published and unpublished research
  • A time varying factor forecast designed to capture investment themes
  • Fundamental inputs to a systematic approach
  • Emphasis on high earning stocks that possess low (but increasing) liquidity and low market cap leads to exposure to stocks our peers may ignore

Key Data

Excess Return Objective: 4-6%, Gross of fees
Tracking Error Objective: 4-6%
Typical Market Capitalization: $500 Million – $5 Billion
Approximate Holdings: 100-150

Domestic

Investment Objective

The Denali Network Value Large investment strategy is measured against the Frank Russell 1000 Value Index, and seeks to return 2-4% gross excess above that benchmark.

Benchmark

Russell 1000 Value Index

Key Strengths

  • The fundamental equity valuation insights from Denali Advisors published and unpublished research
  • A time varying factor forecast designed to capture investment themes
  • Fundamental inputs to a systematic approach
  • Emphasis on high earning stocks that possess low (but increasing) liquidity and low market cap leads to exposure to stocks our peers may ignore

Key Data

Excess Return Objective: 2-4%, Gross of fees
Tracking Error Objective: 4-6%
Typical Market Capitalization: $1+ Billion
Approximate Holdings: 55-60

Investment Objective

The Denali Network Value Mid strategy, measured against the Frank Russell Mid Cap Value Index, seeks to return 2-4% gross excess above that benchmark.

Benchmark

Russell Midcap Value Index

Key Strengths

  • The fundamental equity valuation insights from Denali Advisors published and unpublished research
  • A time varying factor forecast designed to capture investment themes
  • Fundamental inputs to a systematic approach
  • Emphasis on high earning stocks that possess low (but increasing) liquidity and low market cap leads to exposure to stocks our peers may ignore

Key Data

Excess Return Objective: 2-4%, Gross of fees
Tracking Error Objective: 4-6%
Typical Market Capitalization: $1-$40 Billion
Approximate Holdings: 50-60

Investment Objective

The Denali Network Value Small investment strategy is measured against the Frank Russell 2000 Value, and seeks to return 3-5% gross excess above benchmark.

Benchmark

Russell 2000 Value

Key Strengths

  • The fundamental equity valuation insights from Denali Advisors published and unpublished research
  • A time varying factor forecast designed to capture investment themes
  • Fundamental inputs to a systematic approach
  • Emphasis on high earning stocks that possess low (but increasing) liquidity and low market cap leads to exposure to stocks our peers may ignore

Key Data

Excess Return Objective: 3-5%, Gross of fees
Tracking Error Objective: 6%
Typical Market Capitalization: $200 Million – $3 Billion
Approximate Holdings: 90-100

Investment Objective

Denali Network Value Micro investment strategy is measured against the Frank Russell Microcap Value, and seeks to return 3-5% gross excess above benchmark.

Benchmark

Russell Microcap Value

Key Strengths

  • The fundamental equity valuation insights from Denali Advisors published and unpublished research
  • A time varying factor forecast designed to capture investment themes
  • Fundamental inputs to a systematic approach
  • Emphasis on high earning stocks that possess low (but increasing) liquidity and low market cap leads to exposure to stocks our peers may ignore

Key Data

Excess Return Objective: 3-5%, Gross of fees
Tracking Error Objective: 5-7%
Typical Market Capitalization: $50 Million-$1.5 Billion
Approximate Holdings: 60-90

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