 | |
| Company type | Private |
|---|---|
| Industry | Investment Management |
| Founded | 1982 |
| Founder | Michael Dever |
| Headquarters | Thornton, Pennsylvania , United States |
Key people | Michael Dever |
| AUM | US$ 66 billion (2020) [1] |
| Website | www |
Brandywine Asset Management, Inc. is an American investment management firm founded and managed by Michael Dever. The firm is registered as a commodity trading advisor.
Michael Dever began personal discretionary trading [2] in 1979. [3] [4] [5] [6]
Dever founded Brandywine Asset Management, Inc. in 1982, [7] [8] and Brandywine continued trading futures on a discretionary basis.
In the 1980s, Dever began developing computer studies on commodity price behavior. The basic research and portfolio modeling concepts Brandywine uses today were developed through a major research project conducted from 1987 to 1991 using staff researchers and students and faculty from several universities, including the Wharton School of the University of Pennsylvania, Villanova University, and West Chester University. [6] The purpose of these studies was to test all of the ideas that Dever had accumulated to determine if they were statistically valid. [2]
Beginning in 1989, Brandywine developed the Brandywine Benchmark Program, which Brandywine traded 1991-1998. The Brandywine Benchmark Program was a broadly diversified, fully computerized program, which incorporated trend-following, seasonal, arbitrage, and fundamentally based strategies. [2] The Brandywine Benchmark Program stopped trading in late 1998 as Dever began to focus on his venture development business.
Dever is a pioneer in risk management and is credited with the development of one of the earliest comprehensive risk management models. In the 1980s, he developed a statistically based money management and risk allocation model. The purpose of the model was to allocate weightings equally to the strategies and markets within a portfolio [2] in order to maintain balance of returns from all strategy-market combinations. [7] The intent of this portfolio allocation model is to ensure that no single market or strategy-market combination dominates the portfolio over an extended period of time. [6] Since that time, elements of this trading model have become popularized as risk parity investing. In 1991, this model was incorporated in the Brandywine Benchmark Program, which was the first trading program to use risk parity portfolio management.
During the years 1999-2007, Brandywine traded multiple strategies and programs, including mutual fund arbitrage, market neutral equity, long-short equity, and futures strategies. In addition, Brandywine's allocation to venture capital investing grew to over 50% of its business. [4]
Brandywine believes in the dynamic nature of markets and the importance of taking an active approach to research. [4] The firm is built on a structure and a philosophy that requires continuous identification and development of new strategies for portfolio diversification. [7]
The offices of Brandywine are located in an award-winning renovated 17th-century grist mill [9] in the Brandywine Valley, outside of Philadelphia, Pennsylvania. The mill renovation project, which includes an actual reconstructed operating mill waterwheel, was designed by Thomas Dever, principal of Dever Architects and brother of Michael. The project was awarded a 1997 Building Excellence Award by the Philadelphia Business Journal. [10]
Brandywine's trading approach is fundamentally based yet systematically applied. [4]
The Brandywine Collective Investment Trust was launched in 2023 and is based on Brandywine's 40+ years of investing experience. The Trust contains a suite of investment funds that are designed to solve for "Sequence of Return" risk in retirement plans.
The two cornerstones of Brandywine's investment approach are diversification and non-correlation of strategies and markets. [7] Brandywine implements a multi-strategy approach, which is unique in the industry. [4] Brandywine's philosophy is to create a relatively hedged portfolio, not by buying hedges which cost a premium but by incorporating multiple trading strategies in the portfolio which complement each other. [4] Brandywine follows a methodology based on "return drivers" to trade broadly diversified portfolios in the global currency, interest rate, stock index, metals, energy, and agricultural futures markets. [7] [11] [12] A return driver is the core underlying reason that drives the price of a market. [11] Brandywine's investment philosophy is based on the belief that the most consistent, persistent, and predictable investment returns across a variety of market environments are best achieved by combining multiple uncorrelated trading strategies (each designed to profit from a logical, distinct return driver) into a truly diversified portfolio. [4] [11] Each strategy must have a high significance of occurring in the future. [7] [13]
Brandywine's trading philosophy is based on broad strategy and market diversification. [3] [7] [14]
True diversification can only be achieved by diversifying across return drivers and trading strategies, not asset classes. Most investors are taught to build a portfolio based on asset classes (such as stocks and bonds) and to hold the positions for the long term. According to Dever, this approach is the equivalent of gambling. [15]
Brandywine focuses on the permanence of trading strategies and seeks to develop strategies with a strong probability of remaining valid over time (a generation or more). [3] [13] Dever does not have confidence in short term, technically driven strategies because he believes these strategies are not based on sound return drivers and, in most cases, are random. [3]
A trading strategy has two components: a system that exploits a return driver and a market that is best suited to capture the returns promised by the return driver. [15]
Brandywine's investment process is based on the scientific method [4] [5] [7] and includes the following primary elements: [3] [15]
Brandywine minimizes event risk. [7] Diversified portfolios are subject to far lower event risk than conventional portfolios. Leverage can even be added to a diversified portfolio, and the diversified portfolio would still have less event risk and volatility than a conventional portfolio allocated to stocks (60%) and bonds (40%). [16] Brandywine's philosophy is to incorporate as many diversified return drivers as possible in the portfolio so that they are not all subject to the same external events. [7] But there is always the risk of loss, regardless of the amount of diversification.
Dever believes that drawdowns are the largest impediment to strong, positive returns over time. [16]
A hedge fund is a pooled investment fund that holds liquid assets and that makes use of complex trading and risk management techniques to improve investment performance and insulate returns from market risk. Among these portfolio techniques are short selling and the use of leverage and derivative instruments. In the United States, financial regulations require that hedge funds be marketed only to institutional investors and high-net-worth individuals.
Passive management is an investing strategy that tracks a market-weighted index or portfolio. Passive management is most common on the equity market, where index funds track a stock market index, but it is becoming more common in other investment types, including bonds, commodities and hedge funds.
A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment. A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, gambles, many types of over-the-counter and derivative products, and futures contracts.
In finance, a portfolio is a collection of investments.
Financial risk management is the practice of protecting economic value in a firm by managing exposure to financial risk - principally operational risk, credit risk and market risk, with more specific variants as listed aside. As for risk management more generally, financial risk management requires identifying the sources of risk, measuring these, and crafting plans to mitigate them. See Finance § Risk management for an overview.
Investment management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. Investors may be institutions, such as insurance companies, pension funds, corporations, charities, educational establishments, or private investors, either directly via investment contracts/mandates or via collective investment schemes like mutual funds, exchange-traded funds, or REITs.
Prime brokerage is the generic term for a bundled package of services offered by investment banks, wealth management firms, and securities dealers to hedge funds which need the ability to borrow securities and cash in order to be able to invest on a netted basis and achieve an absolute return. The prime broker provides a centralized securities clearing facility for the hedge fund so the hedge fund's collateral requirements are netted across all deals handled by the prime broker. These two features are advantageous to their clients.
A "fund of funds" (FOF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. This type of investing is often referred to as multi-manager investment. A fund of funds may be "fettered", meaning that it invests only in funds managed by the same investment company, or "unfettered", meaning that it can invest in external funds run by other managers.
Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment time frame. The focus is on the characteristics of the overall portfolio. Such a strategy contrasts with an approach that focuses on individual assets.
Global macro is an investment strategy that leverages macroeconomic and geopolitical data to analyze and predict moves in financial markets. Large-scale or "macro" political and economic events can disproportionately impact certain sectors, such as the energy, commodity, and currency markets, over others. The strategy typically employs forecasts and analysis of interest rate trends, international trade and payments, political changes, government policies, international relations, and other broad systemic factors.
Currency overlay is a financial trading strategy or method conducted by specialist firms who manage the currency exposures of large clients, typically institutions such as pension funds, endowments and corporate entities. Typically the institution will have a pre-existing exposure to foreign currencies, and will be seeking to:
The following outline is provided as an overview of and topical guide to finance:
Trend following or trend trading is a trading strategy according to which one should buy an asset when its price trend goes up, and sell when its trend goes down, expecting price movements to continue.
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Lars Jaeger is a Swiss-German author, entrepreneur, financial theorist, and alternative investment manager. He writes on the history and philosophy of science, technology, and has in the past been an author on hedge funds, quantitative investing, and risk management. In his widely read blog as well as other media he frequently writes on issues concerning scientific developments, new technologies, and their meaning for society. He is the author of many books on various topics. In 2014, Jaeger published a universal history of science, and in September 2016 a book on the interplay of science and spirituality. His next book "Supermacht Wissenschaften" outlines scenarios of mankind's technological future. His 2018 book "The Second Quantum Revolution - From Entanglement to Quantum Computing and Other Super-Technologies" deals with the latest quantum technologies. His 2019 book "Mehr Zukunft wagen" is a confrontation with the impending technological upheavals that lead to what Jaeger calls “The Human Crisis”. In 2020 he published "Sternstunden der Wissenschaft. A Success Story of Thinking" in which he describes the triumph of science on the basis of four essential intellectual virtues. His 2021 book "Ways Out of the Climate Catastrophe - Ingredients for a Sustainable Energy and Climate Policy" provides an outlook on a possible climate-friendly economy of the future. In 2022 Jaeger published two books: 1. "Emmy Noether - Her rocky Path to the topf of Mathematics" and 2. "The Stumbling Progress of 20th Century Science - How Crises and Great Minds Have Shaped Our Modern World". The first gives a biography - readable also for non-mathematicians - of the greatest female mathematician in history. The second books describes the revolutionary development of ALL sciences from around 1880 to 1950.
Michael Dever is an American businessman, futures trader, and author. Dever is the founder and CEO of Brandywine Asset Management, Inc., an investment management firm founded in 1982, and he is the author of the investment book "Jackass Investing: Don't do it. Profit from it."
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