Meet Blue Orbit
An introduction to our firm and a deeper look at how our values drive our strategy and investment approachDownload PDF of article
Our background and values
Blue Orbit Asset Management is an equities investment management boutique focused on institutional and wholesale clients. Founded in 2018, the founders – Adam Randall, Megan Talmage, Julie Andrews and Damien Green – collaborated extensively with clients to create a true partnership model that offered solutions rather than simply products.
This consultative approach flows throughout the business; from operating structures through to fee models, investment values and comes to an all-encompassing commitment to client alignment across the firm.
Blue Orbit applies quantitative, research-driven and evidence-based investment processes to systematically capture alpha across inefficient markets. Founder and CEO Adam Randall’s background in aerospace engineering led to the creation of Blue Orbit, by name and by nature – a firm that seeks to apply some of the advancement of rocket-science and space engineering to the sphere of investing back on planet Earth.
Blue Orbit’s values are at the core of our business and philosophy. Our values of client alignment, fewer, deeper relationships, generating alpha, diversity, collaboration and transparency. Each element of our business has been built around these principles.
Our business structure
When it came to structuring the business, doing it in the ‘right way’ was a key consideration for Blue Orbit’s founders. It was important to ensure that everything was set up in a way that reinforced the values we were seeking to grow in our business.
Blue Orbit’s founders maintain a majority equity ownership stake in the business, which was key to ensuring alignment within the business and to maintain full ability to drive strategic values and our culture. When it came to selecting a strategic business partner, it was important to align with a partner that allowed and supported our independence and shared in our strategic vision while growing our business.
As a result, Costa Asset Management became our foundation investor, providing cornerstone and seed capital, while holding a minority equity stake. Costa provides corporate services support and strategic expertise. Costa Asset Management’s CEO Elizabeth Whitmore is a member of Blue Orbit’s Board. This alignment and integration allow us the flexibility to drive client outcomes.
Our investment approach
Our team collectively has more than 100 years’ experience in the area of quantitative investment research, portfolio management and trading, across both Australian and global markets. For Blue Orbit, there is a clear alpha opportunity for systematic strategies to succeed in inefficient market segments. These market segments are characterised by lower liquidity, less analyst coverage, minimal market consensus or reliable forward estimates on earnings or valuation. There is also generally a higher concentration of retail investors and day traders leading to large levels of uninformed trading.
This inability for the market to reliably price these securities with low volatility creates strong alpha opportunities for sophisticated investors. The systematic investment style is particularly well suited in volatile environments. As a systematic investor, the entire investment process is based on well-researched and tested, long-term indicators of company success. There is no room for short-term panic or individual biases and removes the temptation or ability for the investment style to drift. We are able to detail our exact investment thesis, attribute our decision making back to our process, and show why and how the strategy has performed in any given market environment.
While change is allowed, any changes have to be researched, tested and have a strong valid thesis on its value add prior to being implemented. Our proprietary research and testing methodology is built on our expert knowledge of market segments. We are not looking to repurpose global academic research to fit a local small-cap market, rather we research and build alpha signals specifically to targeted regions.
Integration of our values in our investment approach –
how we do things differently
We have built a portfolio based on a diversified set of alpha signals, that will outperform consistently in a majority of market environments. The business structure and the innovative fee model have been built for this purpose: to ensure that we are incentivised to create sustainable alpha. Active capital management benefits our clients while not compromising our strategy, as we are careful not to overfill FUM into strategies at levels where alpha could be eroded.
A key differentiator in how we approach our investment process is our integration and collaboration between research, portfolio management and trading functions. Rather than keeping these functions siloed between different people or departments, it is key that our portfolio managers are heavily involved in the research and trading functionalities.
Our experience is that academically driven research is difficult to implement, or suffers from real world constraints that erode alpha opportunities. Our research effort, however, is always driven by what is practical, implementable in live strategies, and will lead back to the key outcome of value add to the end client.
Additionally, the trading side of the portfolio process is a key idea generator for the research effort. Optimisation of trade strategies and timing to minimise costs and turnover is a key area of our research, as it can be a large cost within less liquid market segments. The quantitative research capabilities of our trade team allows us to build highly sophisticated trade cost models and optimise the portfolio construction to reduce the administrative cost base.
Collaboration is a key function of our research design and implementation process. Research is presented to the portfolio management team, as well as to the operational and marketing staff, and there is an open dialogue process for improvements, suggestions and critiques. Any new research needs to be approved by a majority of the portfolio management team prior to implementation.
Research and continuous improvement is the key driver behind our alpha proposition. Markets don’t stand still, and we are always looking to maintain and improve our alpha generation. Research is not limited to new solutions, as many research ideas can be implemented to enhance existing strategies.
As part of the ongoing research agenda, Blue Orbit often seeks to consult with existing and potential clients, consultants and selected industry experts to get their buy-in and feedback on what they need, and to help us prioritise the agenda. The end goal of our research effort is to meet client needs, whether it be to enhance our existing offering or to expand into a new market segment or strategy.
A key reason for our fewer and deeper client relationship model is to allow us to focus on these more specific and targeted future needs rather than designing more generalised products.
Consultation and feedback with institutions and wholesale clients has consistently highlighted the desire for manager transparency, particularly in systematic products. Clients are wary of a ‘black box’ approach, particularly concerned that a manager might not entirely understand what is happening in the engine room of the quantitative process.
Our approach is to be highly transparent with clients, at every stage of the investment process. Although our approach is systematic and data-driven, we believe that the process should be a tool of the investment professional and not its replacement. We can clearly articulate the thesis and construction of our individual alpha signals and why and in what market environments they will and will not outperform. We explain the build-up from individual signals into a diversified alpha signal, and the portfolio construction tools and risk limits used to refine this into a final portfolio.
Client reporting includes returns and attributions for all of the ‘building blocks of this process,-so it is always clear to clients what we were holding and why. This level of transparency can give clients a high level of confidence and familiarity with the approach, the process, and importantly, that it is behaving the way it should. Our strategy is less ‘black box’ and more of a ‘flight data recorder’.
We believe that careful consideration of relevant ESG factors is an important measurement tool in the quality, longevity and long-term return prospects for businesses of all sizes. Accordingly, we apply the same principles throughout the management of our own business, as well as into our investment strategies and investment approach on behalf of clients.
Diversity and collaboration
One of the founding values of Blue Orbit is a drive to ensure diversity and collaboration in our business. From the first day, we have been fully committed to gender equality across the business. This is not just applied at the overall headcount level, but across the senior management team, portfolio management team and Board composition.
We believe in the strong body of scientific and evidence-based research which supports that improved gender diversity and collaboration in decision making improves decision outcomes. We remain committed to maintaining this as a key part of our culture as we grow.
Institutional investors have been driving gender diversity within the fund management space Every fund manager knows that diversification is the only ‘free lunch’ in finance. As quants, we are committed to harnessing the power of diversification in all our investment processes, as a way to reduce risk while improving returns. At Blue Orbit, we approach diversity with the same mindset.
Diversification of our investment team is a way for us to improve the performance and risk profile of our own business.
Focus on technology
At the core of any quantitative process is a keen focus on systems, data and technology. Blue Orbit’s portfolio management team has extensive experience across large organisations in data, workflows, systems and providers for both Australian and Global equities. When building our business from a blank canvas, we were able to select the best available partners in technology, systems and data providers, without legacy issues. After an extensive due diligence process, we have partnered with industry leaders for administration and corporate services, overseen by our highly experienced COO and Operations Manager.
This outsourced operating model allows us to focus our time and efforts on our true value add, driving optimal returns for our investors. We have constructed a secure, comprehensive and robust internal database system (“Mercury”) that allows the team to conduct our proprietary research, modelling and visualisation in a highly granular way. This internal research and modelling effort then feeds into our secure and externally sourced system solutions for portfolio management, risk management and trading/compliance workflows.
Meet the team:
Co-Founder, CEO and Portfolio Manager
B.Eng. (Aero), Ph.D.
Adam is a portfolio manager and is responsible for all aspects of portfolio construction, investment research and continuous improvement. Adam is also responsible for the management of the business. Adam has a Ph.D. in Aerospace Engineering, and spent 6 years at Boeing in aerodynamics and flight simulation. Adam has strong experience researching, developing and managing systematic and quantitative equity strategies at VFMC, Realindex and IFM Investors. This experience covers Australian small and large caps, global developed and emerging markets. Adam has been managing Australian Small Caps strategies since 2007.
Co-Founder, Director and Portfolio Manager
LLB, B.Comm., CFA
Megan is a portfolio manager, and is responsible for portfolio construction and implementation, trade execution and analysis, and research. Megan is a CFA Charterholder and CIPM Certificant. Megan was previously an institutional equities trader specialising in high-touch execution of illiquid small and micro-cap Australian equities trading at Patersons Securities. At IOOF QuantPlus Megan managed Australian, global developed and emerging markets quant strategies, together with an FX hedging overlay. In 2014, Megan moved to IFM Investors to oversee the operational setup of the new Global Equities capability. She was the primary portfolio manager and trader for the global strategies, and co-managed the Australian Small Caps portfolio.
Co-Founder, Director & Head of Distribution
Julie is responsible for all client engagement, strategy, marketing and distribution. Julie was formerly Director, Equities at IFM Investors from 2014- 2016. Previous roles include Head of Institutional Equities Distribution at Vanguard Australia (2013), and Australian Director for FTSE (2007-2013), where she established and developed the business in AU/NZ. Julie also established the Asia Pacific business as Director for Starmine, a global equity research analytics firm from 2003-2007. Julie is a member of the Australian Institute of Company Directors and FINSIA in Applied Finance and Investment Management. Julie is the Chairperson of Youth and Family Connect and is a Founding Board Member of Financial Executive Women (FEW).
Chief Operating Officer
B.A. Business, Accounting
Lewis brings over 30 years of financial services experience. He has held a variety of senior roles. Most recently he spent 5 years at Prodigy Investment Partners where he was a founding director and COO building a multi-boutique fund manager. Previous to this he spent 11 years at Perennial Investment Partners (2003 to 2014),including Chief Operating Officer and Chief Executive Officer. Lewis spent 17 years with County Investment Management (later becoming INVESCO). Lewis has held senior positions in operations, funds management and various other teams. Lewis is also the Non-Executive Chair of the Qualitas Securities Trustee Board and is passionate about community involvement. He is currently Chair of the South Metro Junior Football League(SMJFL), having been on the Board for 6 years.
BEc(Hons), MEc, CFA
Shangitha is a Portfolio Manager, responsible for all aspects of the investment process including portfolio construction, research and trade execution. She holds a Bachelor (Hons) and Masters in Economics from Monash University, is a CFA Charterholder, and is a Graduate of the Australian Institute of Company Directors.
Prior to Blue Orbit, Shangitha was a Portfolio Manager within Vanguard’s Quantitative Equity Group (QEG),where she was responsible for the daily portfolio management and oversight of QEG’s active equity mandates operated in Australia. Having joined Vanguard in 2008 to launch Vanguard Australia’s initial suite of Exchange Traded Funds, Shangitha has worked across investments, equity trading, capital markets and product management. Prior to Vanguard, Shangitha worked at Perennial Investment Partners and the National Institute of Economic and Industry Research.
Operations & Compliance Manager
Cindy is an Operations and Compliance Manager and is responsible for all operations and compliance monitoring, as well as client reporting, portfolio performance and attribution. Cindy was previously a Performance Reporting Analyst for 6 years at Victorian Funds Management Corporation and NAB Custody. Cindy also has 7 years’ work experience across corporate actions, unit registry, reconciliation and trade settlement during her employment at Omega Global Investors and Vanguard Australia.
At VFMC, Cindy assisted with several projects within the performance team such as the transition of service provider from NAB Custody to StateStreet, system migration to Eagle at NAB Custody, and managed an in-house database system project for the Operations team at Omega. Cindy has completed a Master of Property at RMIT, pursuing her interest in the property sector. Cindy joined Blue Orbit Asset Management in September 2019.Download PDF of article