Our Philosophy, Implementation
Trading is the implementation of investment ideas. We do not attempt to add value through trading. Our goal is to preserve value by bringing the alpha of the stock selection process to the bottom line.
Our process is designed to minimize the potentially significant leakage of returns due to trading and transaction costs:
- Liquidity: The selection universe is limited to the 1500 largest and most liquid stocks.
- Low turnover: Sell-driven rebalancing designed to minimize trading.
Non-traditional trading methodologies:
- Package Trades/Principal Bids - A majority of Shenandoah's trades are implemented via blind principal bids; we submit a profile of our trade list (we do not disclose the actual stocks or position sizes) to at least three bidders prior to the market open. Bidders submit a commission bid for the entire list, guaranteeing the prior day's closing price. By trading in this way, Shenandoah eliminates price risk (market impact). Aggressive bidders include Citibank, Bank of America, Soc Gen, RBC and Goldman Sachs
- Electronic Trading - ITG Triton, Instinet, DOT, Morgan Stanley TradeLink
- Crossing Networks - Posit, Instinet, etc.
- List Management - Morgan Stanley's Basket Link, Instinet OMS & ITG.
Continuous post-trade review and evaluation.
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