Quant-amental Data - cfaboston.org Quant-amental_KG.pdf · 5 Procter & Gamble $177B 2.81% 9 GE...

© 2006-2014 HIP Investor Inc.

Quant-amental Data:Quantitative + Fundamental

Who is HIP Investor?

2CONFIDENTIAL © 2006-2014 HIP Investor Inc.

HIP Verticals: • HIP Investor Inc. & HIP Ratings LLC:

– Quantitative / Quant-amental Equity Analysts

– Fundamental Equity Analysts

– Corporate bond fixed income analysts

– U.S.A. municipal debt analysts

– Pension Plans / Asset Owners

– Financial Advisors / Wealth Advisors / Private Client

– 401-k Plans & Institutional 401-k Providers

– General public / “Main St. U.S.A.” / Retail Investors

CONFIDENTIAL © 2006-2014 HIP Investor Inc. 3

Problem:

• Too much data in the world today. – How do you selectively aggregate what is

important?

– In a systematic mathematical metric based way?

– So it can be repeated?


Solution: • HIP data is:

– Unique

– Ignored by the market, typically

– Systematically collected

– Rigorously quality controlled

– Predictive, usually

– Back-tested

– Utilized in portfolio/asset management at HIP and by HIP clients since 2009


What: • HIP offers a forward looking risk / return

algorithm (HIP score/rating)

– Based on ESG (Environmental, Social, Governance) data

– To assist equity analysts, both fundamental and quantitative analysts, and fixed income analysts

• HIP is:

– A data aggregator

– A quality control measure

– An identifier of value drivers (of/from the data)


Product:• HIP quant-amental covers 80% of global equity market cap• HIP quant-amental researches near 100% of available data• Comprised of 4,150 global equities/companies • HIP quant-amental data contains 6 years of annual data (6

points in time) – We understand this is significantly below the required minimum

of 10 years of monthly data (120 points in time)– Unfortunately, these are the current limitations of ESG data

(short historical duration)

• However, within each year (for each company), there is a robust flavor of meaningful data


Product:• Each level of scoring has material value:

– 32 HIP Metric scores

– 6 HIP Pillar Level scores

– 1 Overall HIP score

• Clients can create their own Pillar Level scores

• Clients can create their own Overall score

• HIP has optimized:

– The correlations & weights

– At (both) the Pillar Level and Overall Level



For each company, HIP analyzes 32 knowable but

ignored FACTORS…

…which are used to develop 6 proprietary

HIP PILLARS…

…which are combined to form a

proprietary HIP RATING.

Management

Health

Wealth

Earth

Equality

Trust

HIP Rating

Proprietary HIP Method

Proprietary HIP Method

ESG Factor 1

ESG Factor 2

ESG Factor 30

ESG Factor 31

ESG Factor 32


∑ mp𝜼n MPFn

5

n=

1

∑ he𝜼n HEFn

5

n=

1

∑ we𝜼n WEFn

4

n=

1

∑ er𝜼n ERFn

7

n=

1

∑ eq𝜼n EQFn

6

n=

1

∑ tr𝜼n TRFn

5

n=

1

Management =

Health =

Wealth =

Earth =

Equality =

Trust =

knowable

but

ignored

HIP

proprietary

HIP Methodology – PILLARS:


HIP Methodology – RATINGS:𝜼MP Management Pillar +Company HIP

Rating = 𝜼HE Health Pillar +

𝜼WE Wealth Pillar +

𝜼ER Earth Pillar +

𝜼EQ Equality Pillar +

𝜼TR Trust Pillar +

Product / Service

Industry RatingScore between

0.00 and 100.00

HIP

proprietary

RESULTS:

S&PRank

S&P 100(y/e 2009)

Market Value

S&PWeight

1 Exxon Mobil $323B 5.14%

2 Microsoft $235B 3.74%

3 Apple $189B 3.01%

5 Procter & Gamble $177B 2.81%

9 GE $161B 2.56%

19 Intel $116B 1.80%

23 Philip Morris $95B 1.40%

100 Lockheed Martin $24B 0.38%

HIPRank

HIP 100(y/e 2009)

HIP Score HIP Weight

1 Procter & Gamble 71.0 1.47%

2 GE 70.8 1.46%

3 Intel 70.0 1.45%

24 Microsoft 57.2 1.18%

41 Lockheed Martin 53.2 1.10%

56 Exxon Mobil 48.4 1.00%

68 Apple 42.8 0.88%

100 Philip Morris 15.0 0.31%


Sector Weights: HIP 100 vs. S&P 100

16.1% 22.4%

15.0%14.3%

14.2% 8.8%

12.6% 12.2%

12.4% 13.7%

9.3% 6.7%

8.9% 13.8%4.8% 1.8%3.6% 1.6%

3.1% 4.7%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

HIP100 S&P100

TelecomUtilities

MaterialsEnergy

Consumer D.

Health Care

Financials

Industrials

Consumer Staples

Info Tech



Coverage Universe: 4,150 global equitiesRepresenting 80% of globally traded market capRepresenting near 100% coverage, where available

History: Since 2008Six (6) years

Update Frequency: Annual

Data Fields & Identifiers: ISIN, MNEM/DSCD, Company Name

HIP Quant-amental Solution

Why:• The forward looking HIP risk / return algorithm

(score) can lead to:– Lower volatility of a portfolio

– Potential equity portfolio out-performance

• Each HIP score (Metric, Pillar, and Overall score –each individually) is/are linked to corporate:– Cash flow

– Cash flow volatility How :• We collect, aggregate, and quality control

publicly available, but ignored data



Non-Profit Sources: Commercial Sources:• American Customer Satisfaction Index

– http://www.theacsi.org/

• American Wind Energy Association – http://www.awea.org/

• CDP (formerly the Carbon Disclosure Project)– https://www.cdp.net/

• Ceres– http://www.ceres.org/

• Environmental Defense Fund– http://www.edf.org/

• National Association of Attorneys General– http://www.naag.org/

• Root Capital– http://rootcapital.org/

• U.S. Department of Commerce, Bureau of Economic Analysis– http://www.bea.gov/

• Transportation, Research and Innovation Technology – http://www.rita.dot.gov/bts/home

• U.S. Securities and Exchange Commission– http://www.sec.gov/

• Water.Org– http://water.org/

• Business Wire– http://www.businesswire.com/

• OTC Environmental – Chicago Climate Exchange– https://www.theice.com/ccx

• CNN Money– http://money.cnn.com/

• Google Finance– https://www.google.com/finance

• Maslow, Abraham. “A Theory of Human Motivation”, 1943.– http://www.amazon.com/Theory-Human-

Motivation-Abraham-Maslow/dp/1614274371

• McKinsey– http://www.mckinsey.com/

• NASDAQ– http://www.nasdaq.com/

• The Economist– http://www.economist.com/

• The Wall Street Journal– http://wsj.com/

• US Biofuels Exchange– http://www.us-bx.com/ex/

http://www.theacsi.org/

http://www.awea.org/

https://www.cdp.net/en-US/Pages/HomePage.aspx

http://www.ceres.org/

http://www.edf.org/

http://www.naag.org/

http://rootcapital.org/

http://www.bea.gov/

http://www.rita.dot.gov/bts/home

http://www.sec.gov/

http://water.org/

http://www.businesswire.com/portal/site/home/

https://www.theice.com/ccx

http://money.cnn.com/

https://www.google.com/finance

http://www.amazon.com/Theory-Human-Motivation-Abraham-Maslow/dp/1614274371

http://www.mckinsey.com/

http://www.nasdaq.com/

http://www.economist.com/

http://wsj.com/

http://www.us-bx.com/ex/

An example of HIP quality control:• Information which companies declare publicly

contain(s) a very high level of accuracy (statistically)

• However, mistakes do happen:

– Heinz reported 800 tons of carbon emissions for a single year. HIP knew this was incorrect.

– We contacted Heinz and started a dialogue with them.

• Subsequently, they corrected/amended their report to accurately reflect the correct number (which was off by three magnitudes)



Examples of HIP Metrics:• Customer Satisfaction

• Employee Satisfaction

• Employee Retention

• Employee Health and Wellness

• Packaging Efficiency

• Recycling Efficiency

• Water Efficiency

• Energy Efficiency

• Material Efficiency

• Political Donations

• Lobbying Expenses

• Employee Safety

• Communication and Transparency to/with:– employees– shareholders– the communities of operation

• Supplier Chain Management (safety, etc.)

• Risk Management (exposure to sea level rises, and other Acts of God)

• Carbon emissions/efficiency• Legal Proceedings, Potential

Liabilities, Pending Lawsuits• Board Diversity

Summary:

• In light of the GFC (global financial crisis of 2008), many institutional investors agree - there is a known absence of meaningful data, which can be (or is) linked to forward looking risk and return

• HIP quant provides institutional investors further insight “up several levels” inside the shareholder value tree, and shines a light on the expertise (or lack thereof) of the key management capacity of a company

• The combined research staff of our: (i) commercial vendors & (ii) non-profit vendors is in the thousands


About HIP:

• HIP INVESTOR INC. & HIP INVESTOR RATINGS LLC

– Incorporated in 2006, 2014 (spin-off)

– Offices in San Francisco, California & New Jersey

• HIP 100 - Launched in July 2009

• HIP Preferred - Launched in December 2011

• HIP REIT - Launched in February 2012

• HIP Best Companies - Launched in June 2013


About HIP:• HIP operates much like a hedge fund, with 5 FTEs

whom have patents in IT, ESG/sustainability, etc.

• We are data driven and focused on quality control

• We have years of intellectual property and have created a repeatable process (with results)

• Additionally, we are, “putting our money where our mouth is”

– HIP 100, five year anniversary 2014


About HIP:

• R. Paul Herman’s book, “The HIP Investor” is part of the curriculum of 20+ domestic Universities/colleges

• Paul is a world renowned speaker on the impact of HIP’ness, and the specific correlations derived from sustainability performance related to:

– Individual equity cash flow volatility

– Portfolio level cash flow volatility

– Potential equity outperformance

– Forward looking risk metrics

– The shareholder value tree, a.k.a. value creation


HIP Team:• R. PAUL HERMAN, CEO + Founder, Chief Investment Officer, Portfolio

Manager, Investment Adviser– Internationally recognized expert in impact investing, Paul Herman invented the “HIP =

Human Impact + Profit” ratings system in 2004, published his book, “The HIP Investor” in 2008, and launched HIP’s flagship fund, the HIP 100 in 2009.

– HIP Ratings lower risk, enhance returns (profit potential), and build a better world — by focusing on the root-cause drivers of value creation, which include human (customers, employees), social (trust, governance) and environmental (energy, water) factors, and their associated impact on profit.

• R.M. ‘AUROS’ HARMAN, Senior Vice President, Technology, and Analysis– Auros is a co-creator of high tech patents. Auros leads the design, collection, and

analysis of quantifiable sustainability metrics and sourcing. Auros has a polymathicbackground, including degrees from the Johns Hopkins University in Computer and Cognitive Sciences, and experience in software design.

– Auros spent six years in statistical linguistics at Motorola. At Intuit, he helped develop a tool that allows businesses to convert purchasing data into information that helps them (i) understand and manage their environmental impacts, and (ii) create marketing materials focused on their progress (or performance relative to peers).

– Auros expertise also includes financial modelling aimed at the deployment of mid-scale clean energy co-generation assets.


HIP Team:• SHILPA ANDALKAR, Senior Vice President, Client Solutions,

Series 65 Investment Adviser– Shilpa assists in the design, operation and evolution of HIP Investor’s impact, risk and

reporting methodology. She brings data system expertise, as well as project management experience.

– Shilpa graduated with Honors from the University of California, San Diego with a B.S. in Economics. She holds a Series 65 license. Shilpa leads client services.

• KEITH GREEN, Senior Vice President, Global Head of Sales, Client, & Partnership Development– At CitiGroup Keith specialized in off balance sheet finance, structured finance, and project

finance for corporates. Keith has also served clients as a Financial Advisor at Merrill Lynch.

– Keith combines the knowledge of fundamental finance, quantitative finance, and sustainable finance. Keith has built several businesses from the ground up including ASSET4 (now owned by Thomson Reuters) and 10EQS consulting.

– Keith has extensive experience advising institutional clients (asset owners, and asset managers) seeking correlations among financial returns, future risk, and the true source(s) of value creation.

– Keith was the 2nd employee hired by ASSET4 in North America, 2006 – bought by Thomson Reuters, 2009.


HIP Team:

• LIH-HANN CHIU, Quantitative / Quanta-mental Solution Specialist– Lih-Hann focuses on client development within quantitative hedge funds / quant-

amental asset managers. As one of the first employees at financial technology provider Revere Data, LLC (acquired by FactSet Research Systems), he led Revere's research, product development, partnership management, operations, and client development efforts targeting multiple financial services sectors including quantitative trading.

– Having developed products and tailored solutions in mature, growth stage, and business turnaround environments for a variety of industries such as financial services, maritime shipping, logistics, energy, manufacturing, agriculture, retail, and U.S. Government agencies, Lih-Hann specializes in applying robust and diverse mental models to problem solving.

– Lih-Hann has a B.S. in Computer Science from San Francisco State University, and currently lives in New York City with his wife Seol Park, an art industry marketing consultant, agent, gallery manager, and business advisor.


How to contact HIP:


Lih-Hann Chiu Quantitative / Quant-amental

Solution Specialist

[email protected]: 415-640-7486

Keith Green Global Head of Client, &

Partnership Development


R. Paul Herman Founder, CEO, CIO, & Portfolio

Manager


mailto:[email protected]



Quant-amental Data - cfaboston.org Quant-amental_KG.pdf · 5 Procter & Gamble $177B 2.81% 9 GE...

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