Identifying good hedge funds is not enough on its own.

The real added value comes from understanding the inter-relationships between managers and strategies to intelligently design a diversified portfolio capable of performing in changing market conditions. This requires significant investment in people, processes and investment technology.

The product of extensive development, OPTICS is Ermitage's innovative solution for creating and managing hedge fund portfolios to meet specified objectives. It is built on a robust five stage process:

1. Client & portfolio objectives

2. Data analysis

3. Forecast development

4. Construction algorithm

5. Rationalisation & completion

Our approach begins with the question "What is your hedge fund portfolio supposed to achieve?"  We then work with each client to tailor a programme that integrates hedge funds with their current portfolio in a way that best meets their needs.  We call it intelligent portfolio design.

Central to OPTICS is an advanced construction algorithm that transforms forecasts into portfolios. Taking Ermitage's macro, strategy and manager forecasts, it identifies how the portfolio can increase the probability of delivering its risk-adjusted objectives.

At each stage of this fully transparent process, clients can examine how the portfolio has been put together including the investment decisions and assumptions that underpin asset allocation - and make adjustments to the portfolio composition to ensure it is well positioned to do what it is intended to do.