Omega talks up model
Melbourne-based investment manager Omega Global Investors has sought to promote its methodology which it claims has proved more accurate in identifying mispriced credit.
The company claimed this week that a credit default model had succeeded in delivering consistent positive returns.
It said the process represented a refinement of the existing Omega Financial Health Rating, enabling Omega to effectively compare credit risk both within and — significantly — between sectors.
The company claimed the approach also enabled effective comparison irrespective of geography, allowing developed and emerging market companies to be compared like for like.
Commenting on the methodology, Omega Investment research analyst Andrew Cleeland said mispricing spelled opportunity for investors, but was not always easy to spot except in hindsight.
"This is generally because of the complexities of comparing different issuers from different sectors from different regions — in other words, factors that can change from moment to moment," he said.
Cleeland said the Omega model had been designed to capture this complexity, "giving us a ‘top down' approach that highlights where the opportunities are".
"Our process has been refined and developed over time to encompass a growing number of financial ratios including profit, leverage, market information and efficiency," he said.
"The fact is that in a market environment that's characterised by shift and change — more often than not defying convention. It's up to investment managers to be aware and responsive to the conditions and environment rather than using backward-looking tools to make forward-looking decisions," Cleeland said.
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