ABOUT MELIUS

OVERVIEW

Melius Investments was founded on the principle that investors deserve better.  Very few would disagree that technology has helped transform our lives for the better. Whether it is cell phones, an ability to rent a room to a traveler, or even a coffee machine that brews a single cup of coffee almost instantly, we have been fortunate to see how powerful and wonderful steps forward have enhanced our lives.  Sadly, this movement forward has been largely missing from the investment management industry, as it continues to utilize the same old tired techniques and products for managing client assets. Melius Investments is changing that.

At Melius Investments, we have created investment portfolios that benefit from a deep understanding of historical portfolio construction and now takes that forward with the use of enormously beneficial technological advances such as big data, ensemble methods, machine learning and even artificial intelligence.

Rather than relying on a single manager, Melius’ model portfolios deliver a multi-expert approach by extracting High Conviction Overweight positions from a dozen managers and then combining them into a “best of the best” portfolio based on the utilization of Ensemble Methods which looks for the highest consensus agreement.

CURRENT DILEMMA

Active management has failed but it is not for the reason investors have been led to believe. It is NOT because active managers are not good at what they do and that they don’t pick good stocks. In fact, when one looks at the portion of the portfolio that drives Alpha inside the portfolio, we actually come away with a striking conclusion – ACTIVE MANAGERS ARE GOOD AT PICKING STOCKS.

So if they are good at picking stocks, why has active management failed? They have failed because of the way the portfolios have and continue to be constructed.

What does this mean? It means that under current portfolio construction, the managers have a percentage of their portfolio that is designed to drive Alpha or in simple terms, generate returns for the portfolio. The rest of the portfolio is there to help manage risk and thereby not designed to contribute to the returns of the portfolio. So in effect, the expected return that investors are hoping to achieve is only resulting from a portion of the portfolio. Sadly this is like asking a boxer to fight with one arm behind their back. Sure they might win with a well placed punch but their chances of success are not good.

SOLUTION

Ensemble Active Management (EAM) to the rescue. Melius’ Model Portfolios are designed with the goal that the investor benefit from the ENTIRE portfolio. This is accomplished because our portfolios:

1. Consist 100% of securities that are the High Conviction Overweight positions from our managers. The result is a portfolio whereby each security is expected to generate Alpha.

2. Utilize a layer of diversification at the manager/investment process level that is available through the multi-expert model. This layer, we believe, adds greater value to a portfolio than the traditional method of excess security diversification.