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Fundamental Research

Rigorous and disciplined fundamental analysis is the cornerstone of our investment process. We have a team approach to laying out our investing process and strategy with a bottom-up as well as a top-down view on the markets and the economy. Our investment approach strives to deliver superior long-term investment results through proprietary fundamental research and truly individualized portfolio management. Our primary area of research expertise is in the analysis of individual stocks and bonds. Extensive due diligence is undertaken in order to identify the fundamental value of each investment. As markets are often semi-efficient, we seek to successfully exploit these market errors across asset classes and individual securities.

From a big picture perspective, we undertake a comprehensive review of the global macro environment and sector economics. Thus, we aim to identify sustainable cyclical and secular investment trends. In equities, we seek to allocate capital in industries with secular growth prospects. We have a strategic preference for large-cap industry leaders that have long-term track records, strong balance sheets, steady dividend growth and high returns on capital. Our valuation methodology utilizes a mix of quantitative and absolute valuation tools. As we distill our equity universe, we carry in-depth equity valuation by using our proprietary discounted cash flow model. We establish the intrinsic equity value by identifying the critical valuation and risk drivers and by modeling a full business cycle of a company. Long-term valuation is driven by mid-cycle normalized assumptions, as competition increases and businesses mature.

Our fixed income approach is designed to preserve capital while earning high returns with low volatility. As the interest rate environment changes we adapt our portfolio duration and we typically focus on high credit quality domestic bonds of intermediate duration which are held to maturity. Due to our capital markets experience and contacts, we have an extensive network of counterparties (such as boutique regional dealers and market makers) to access a variety of the fixed income products that we often invest in. Edge has expertise across the fixed income spectrum, with particular expertise in mortgage backed securities (MBS) such as residential non-agency MBS; as well as corporate credit. Our fixed income modeling focuses on assessing the present value of future cash flows by quantifying risk parameters such as interest rate risk, credit quality and prepayment risk.