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 which offered solutions – rather than just 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 and collaboration and transparency. All parts of our business have 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 the Blue Orbit 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 we felt was key to ensuring alignment within the business and to maintain full ability to drive strategic values and culture
throughout the business. When it came to selecting a strategic business partner, it was important to us that we aligned with a partner which allowed and supported our independence and shared in our strategic vision whilst growing our business. As a result, Costa Asset Management became out foundation investor, providing cornerstone and seed capital to the business whilst holding a minority equity stake. Costa provide corporate services support and strategic expertise as well as having their CEO Elizabeth Whitmore a member of Blue Orbit’s Board. This alignment and integration allows us the support we need to drive client outcomes.
Our investment approach
Our team collectively has more than 100 years of 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 and generally a higher concentration of retail investors and day traders leading to large levels of speculative trading.
This inability for the market to reliably price these securities with low volatility creates strong alpha opportunities for a sophisticated active investor. The systematic investment style is particularly well suited to these volatile and ever changing 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. Whilst change is allowed, any changes have to be researched, tested and have a strong and defensible thesis on its value add, prior to being implemented.
Our proprietary research and testing methodology is built on our significant knowledge and expertise of investing in the specific market segments we are targeting. We are not looking to re-purpose global academic research to fit a local small cap market, rather we research and build alpha signals specific to those regions that we are targeting.
Integration of our values in our investment approach –
how we do things differently
The key driver of our investment process is seeking alpha. We are looking to build a portfolio based on a diversified set of alpha signals, that will outperform consistently in a majority of market environments. We have built the business structure and the innovative fee model around this purpose: to ensure that we are incentivised to create sustainable alpha. This benefits our clients 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, we think 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 overall trading costs.
Collaboration is a key function of our research design and implementation process. Research is presented to the portfolio management team, as well as operational and marketing staff, and there is an open dialogue process for improvements, suggestions and critique. Any new research needs to be approved by a majority of the portfolio management team prior to implementation.
Research and continual 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 smaller 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 this 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 size. 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.
We look at ESG through the lens of what makes a strong, sustainable business with long term growth and
profitability prospects. We look to incorporate the UNPRI SDG goals and framework into how we create, measure and monitor our ESG framework. ESG issues at a high level are considered across the spectrum of Blue Orbit’s identified ESG priorities in line with our values, and the feedback and needs of our clients with regards to
ESG outcomes from their managers. Because we are not tied to any one data provider or methodology framework- we can be flexible to the client’s specific needs. Having fewer and deeper client relationships allows us to provide these ESG customisations.
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 headcount, but across the senior management team, portfolio management team and Board composition stages.
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 key part of our culture as we grow.
Institutional investors have been driving gender diversity within the funds management space (Frontier/Towers research), however there is still a significant under-representation of women across funds management. Every fund manager knows that diversification is the only ‘free lunch’ in finance. As quants, we are committed to the harnessing of 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.
We also see the importance of inclusion and collaboration as the way to ensure we are optimising the benefit of our team’s diversity. Diversity is most useful in an environment that fosters open discussion and allows differing viewpoints and disagreement. We are actively seeking to maintain a collaborative, open culture that encourages feedback and input from everyone. One example of this is our investment research presentation process, which is open to all staff and which is highly discussion based. Portfolio management responsibilities require dual decision making, with no one person making individual decisions on live trades or corporate activity
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 have extensive experience across large organisations in data, workflows, systems and
providers for both Australian and Global equities. When building our business from a blank slate, we were able to select the best available partners in our technology, systems and data providers, without any overhanging legacy issues. After an extensive due diligence process, we have partnered with industry leaders in the administration and corporate services space, 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 -the investment management process.
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 secure, 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:
Chief Executive Officer 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.
Director and Portfolio Manager
LLB, B.Comm., CFA
Megan is a portfolio manager, and is responsible for all operations, as well as trade execution and
analysis, portfolio performance and attribution. Megan is a CFA Charterholder and CIPM Certificant. Megan was previously an institutional equities trader specialising in small and micro cap Australian equities trading
at Patersons Securities. At IOOF QuantPlus Megan managed Australian, global developed and emerging markets factor based 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 optimised index strategies, and co-managed the Australian Small Caps portfolio.
Director & Head of Institutional
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 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. More recently, Julie was named Chairperson of Youth and Family Connect and is Founding Board Member of Financial Executive Women.
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 Non-Executive Chair of the Qualitas Securities Trustee Board, and, passionate about community involvement, currently Chair of the South Metro Junior Football League (SMJFL) having been on the Board for 6 years.
Assistant Portfolio Manager
Matthew is an Assistant Portfolio Manager, responsible for assisting in all aspects of the investment process, including portfolio construction, investment research, trade execution and performance analysis. Matthew holds a Ph.D. in Computational Social Science (CSS) and is a CFA Charterholder. While completing his Ph.D. Matthew published various peer-reviewed journal articles researching the relevance of networks and feedback mechanisms in financial markets. Prior to his studies, and joining Blue Orbit, Matthew was an investment analyst at Equity Trustees (EQT) where he covered various sectors in the ASX200 and international equity funds. Preceding these roles Matthew performed corporate development activities at EQT and sales analytical and planning activities in the Australian automotive industry. Matt joined Blue Orbit Asset Management in January 2020.
Operations & Compliance Manager
Cindy is an Operations and Compliance Manager, and is responsible for all operations and compliance monitoring as well as client reporting and 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 different areas in operations – corporate actions, unit registry, reconciliation and trade settlement during her employment at Omega Global Investors and Vanguard Australia. Cindy has assisted in several projects within the Performance team such as transition service provider from NAB Custody to StateStreet at VFMC, system migration to Eagle at NAB Custody, and managed an in-house database system project for the Operations team at Omega. Recently, Cindy completed her 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