In traditional discretionary management, conviction often means concentration. A portfolio manager who "really believes" in a stock might allocate 10%, 15%, or even 20% of the portfolio to a single name. When that bet works, it looks like genius. When it does not, it can define a quarter.
The GNH Fund takes a different approach.
The Bounds: 0.2% to 3.0%
Every stock in the portfolio is bounded between 0.2% and 3.0% of total portfolio weight. No exceptions. These bounds are enforced at the optimization level — they are constraints in the optimizer, not guidelines reviewed after the fact.
Why a Floor of 0.2%?
The GNH Fund holds approximately 190 BIST stocks — the full spectrum. Equal weight would be roughly 0.52% per stock. The 0.2% floor ensures that even the smallest positions remain meaningful enough to contribute to portfolio characteristics while maintaining full-spectrum exposure.
Why a Ceiling of 3.0%?
A 3.0% cap means that no single stock can dominate the portfolio. Even if the optimizer strongly favors a particular stock based on risk-return characteristics, the maximum exposure is controlled. This protects against:
- Idiosyncratic risk: A single company's earnings surprise, regulatory action, or liquidity event
- Optimizer over-fitting: The tendency of quantitative optimizers to produce extreme weights when input estimates are noisy
- Liquidity risk: Ensuring that large positions can be unwound without significant market impact
The Net Effect
Position-level bounds transform the optimizer from a tool that might produce "optimal but fragile" portfolios into one that produces "robust and tradeable" allocations. The theoretical Sharpe ratio may be slightly lower than an unconstrained optimizer would suggest, but the realized performance is more stable and the portfolio is executable in practice.
This is what risk-first means: the constraints are not afterthoughts. They are embedded in the process.
Past performance is not indicative of future results.