A Better Cost Equation
Perhaps the most important and overlooked consideration in pursuing superior outcomes for clients is the impact of expenses. The relevant outcome for a client portfolio is the net return after all costs are accounted for, including advisory fees, manager fees, and trading costs including bid/ask spreads. Logia pursues the best possible outcome, by reducing costs where it is not justified by the potential value added.
Separating Beta from the Pursuit of Alpha
Research shows that a substantial portion of return for active managers is a function of simply participating in the market (Beta).* This is particularly true for core markets, such as large cap stocks. Very few managers achieve a statistically significant excess return over the market (Alpha) after factoring out decisions they don’t control.
Beta can be bought via ETFs or index funds at a much lower cost than active management, often resulting in better net returns to investors. Logia takes the advantage one step further by manufacturing Beta - modeling the indices with individual securities - creating additional cost savings and better net returns. It also allows for customizations to portfolios, accommodating unique investor preferences or requirements.
Accessing Active Managers Via Models-Based Management
Even where active management is justified, or preferred by clients, Logia has the ability to deliver significant savings over conventional mutual funds or separate account managers through models-based management.
In the models-based approach, managers deliver and update their model portfolio, including the securities and weightings. Logia can implement the strategy at a much lower cost and with much greater control. The models-based approach allows for more effective management of the total portfolio’s tracking error, and enables Logia to customize for clients based on their social or other investment restrictions.
