What We Do
Rodeo Investments develops systematic investment strategies using quantitative factor research and empirical asset-pricing methods.
Research focuses on identifying economically motivated sources of alpha and determining whether they can be translated into implementable investment strategies.
Philosophy
Investment Approach
Rodeo Investments applies a factor-based investment framework to identify systematic sources of return across liquid markets. Research is not constrained to conventional factor definitions: potential signals are investigated wherever there is a plausible economic mechanism and sufficient empirical evidence, including in places that standard factor models do not look.
- Identify economically motivated sources of potential alpha.
- Test their ability to predict returns using historical point-in-time data.
- Evaluate whether the relationship survives realistic market and execution constraints.
- Translate only implementable signals into systematic portfolio rules.
Derivatives markets are one example of where such information may be found. Option prices reflect how market participants price uncertainty and risk, and can carry information that is not yet fully visible in the underlying securities. They are one area of research among several; the same framework is applied wherever a credible economic rationale exists.
Method
Research Process
Finding historical alpha is only the first challenge. The harder question is whether it can be captured ex ante, in a live and implementable strategy, and still produce abnormal returns relative to the market.
01
Economic hypothesis
Research starts with an economically motivated hypothesis: a reason why a particular market relationship might contain information about future returns, and why that information might not already be fully reflected in prices.
02
Historical evidence
The hypothesis is tested empirically on historical data to establish whether it produces economically and statistically meaningful abnormal returns.
This stage applies the standard tools of empirical asset pricing: point-in-time data, controls for known risk factors and robustness analysis across specifications, sub-periods and market environments.
03
Real-world implementation
If the evidence supports the hypothesis, the question becomes whether the relationship can actually be harvested in real markets, using only information available at the decision date and after the frictions every investor faces.
- Information available at the decision date
- Liquidity
- Trading costs
- Turnover
- Execution
- Portfolio construction
A relationship that is significant in historical data but cannot be traded at the decision date, at realistic cost and in realistic size, is not an investment strategy. Only signals that pass all three stages are implemented.
Objective
Performance Evaluation
The primary objective is long-term compounded investment returns. Return generation is the purpose of the research; risk management exists to make those returns sustainable, not to minimise volatility for its own sake.
Portfolio construction therefore takes account of:
- Diversification
- Concentration
- Drawdowns
- Transaction costs
- Turnover
- Market exposure
- Behaviour across market environments
Risk-adjusted statistics such as the Sharpe ratio and volatility are monitored as useful diagnostics, but no single metric fully captures the economic quality of an investment strategy. Performance is therefore assessed primarily through compounded returns, alongside drawdowns, portfolio concentration, implementation costs and behaviour across market environments.