Introduction

Portfolio management theory has failed most investors during the current economic crisis. Returns that were previously thought to be uncorrelated have been seen to have a strong positive correlation

QCA addresses this issue by incorporating country risk assessment into the asset allocation process

Backtested QCA-driven indices of international government bonds and emerging market equities outperform their standard market-capitalisation-weighted indices

Country Insights invests the company's own money and that of its founders in an emerging market equity index

Measuring Investment Potential

Country Insights has developed a process for producing investment indices that combines QCA analysis with market prices to produce country weightings.

We call this Measuring Investment Potential (MIP)

We have backtested these indices to demonstrate that they add value in emerging market equity and emerging and developed market government bonds

MIP only weights between countries, not individual securities

Principles of our backtesting

We have only backtested MIP using countries that are constituent members of the underlying index we are tracking.

In Eurozone government bonds, however, we continue to include countries that have been excluded because they have fallen below a credit rating threshhold. 

We have constrained our country selection to allow us both to clearly identify MIP's contribution to asset allocation and to reflect available pricing data

We have, where possible, tried to avoid beign casuistic in our backtesting and have not used any statistical optimisation

We rebalance all indices quarterly

We have backtested all of our indices for six years, as many of the data inputs for QCA have only been available for that period. 

However we have done some backtesting in emerging market fixed income for fifteen years, which we are happy to share upon request