Risk Management
Risk management is the key to insuring against uncertainties.

The team at Lucus believes that risk management is the key to insuring against uncertainties and therefore works to seamlessly integrate it into strategy.

We employ rigorous risk controls adapted for each of our strategies:

Our Strategies

At Lucus Advisors we have worked hard to develop strategies that are meaningful and successful.


Red Alder

  • Select downside evaluation and reduction triggers
  • Manage fundamental uncertainty via intensive due diligence and management interaction
  • Hedge non-core / non-differentiated assumptions
  • Utilize patient capital to capitalize on market stress and corporate flux
  • Select entry opportunities carefully and hold cash until we have a differentiated thesis
  • Foster diverse opinions and be creative on how we gather them; know opposing arguments and promote a culture of intellectual honesty by constantly discussing how we could be wrong and monitoring for thesis drift; actively avoid confirmation bias
  • Seek quantitative robustness by comparing detailed models to “toy models” / ”back of the envelope” calculations
  • Stay disciplined on process yet always search for means of improvement; study outstanding processes across fields. Present the same risks in different ways to prevent framing biases.

Kernel

  • Risk controls are based on fundamental, statistical and macroeconomic equity factor models.
  • Our highly-refined, rigorous fundamental process is implemented systematically to eliminate human decision biases.
  • Daily risk decomposition into factor-based risk and stock-specific risk.

Coppice

  • Ongoing risk evaluation regardless of changes in performance, correlations, positions, exposure, and organization.
  • If an underlying position declines by 10% of cost, the Investment Committee holds an ad hoc meeting to review the position. If the thesis has drifted or the underlying fund has experienced adverse structural changes, the position will be exited as a matter of course. If the position declines by 20% at cost, then it will likely be eliminated.
  • Red Alder

  • Kernel

  • Coppice