Investment Research

Research is an essential and integral part of the effort at L.A. Capital. While the firm has 12 full-time professionals formally designated as "the research team," every employee at the firm is ultimately involved in the origination and development of ideas to help improve and refine the firm's processes.

Factor Research

L.A. Capital's approach to equity management is based upon the concept of "Investor Preference Theory." The primary objective of the research team is to identify risk characteristics in the market which investors are presently pricing, with the hopes of revealing their "preferences" over time. These preferences are then expressed as factor expected returns. Once the research group identifies factors which the market considers relevant, the next task is to measure and analyze these factors appropriately. Some of the factors are traditional measures of style, size and quality, while others are more specialized. All identified factors are readily comprehended by investors and the market and hence, efficiently priced. As investors' understanding of the equity market evolves and as the market itself changes, L.A. Capital's commitment is to find new factors that more thoroughly explain equity performance.

Statistical Modeling

L.A. Capital utilizes a wide variety of statistical tools to properly measure factor returns and to distinguish between true signals and noise. The techniques that the firm uses are the result of over 30 years of modeling financial data-the last dozen years specifically applied to the Dynamic Alpha Model. Much of the ongoing research is devoted to incorporating state-of-the-art statistical methodologies into the estimation techniques, and customizing these for specific data characteristics and model applications.

Portfolio Construction and Risk Control

The glamorous aspect of quant research seems to be focused on stock selection: building an alpha model where the top quintile regularly outperforms the bottom quintile; building a model better than the competition's; or building a model that is superior to one's own previous versions. However, the client is less interested in statistical modeling and more interested in how well the resultant information produced by the model is incorporated into building a realistic portfolio; one consistent with the client's constraints and objectives. L.A. Capital takes great pride in the firm's ability to build customized, risk-controlled portfolios. This has allowed the firm to deliver a uniform, consistent product customized and maintained to satisfy a diverse client base, tracking more than two dozen benchmarks.

Wave Trading

L.A. Capital's research efforts have also been productive for the firm's trading desk. This effort has led to the development of proprietary, real time trading algorithms which have decreased trading costs and increased overall trading capacity. Additionally, the firm has garnered more control over the entire trading process, from order submission through trade execution.

Information Technology

Software and systems development are essential components in building a successful quantitative investment process. At L.A. Capital, there is substantial migration between classical research and information technology, both in terms of projects and personnel. The research staff and software programming staff are collectively involved in the development of software projects.. L.A. Capital encourages all of its staff to participate in investment meetings to better understand how each individual's day-to-day efforts contributes to the overall mission of the firm.