SD-02.6 — Investment Thesis Management

Business Domain: BD-02 Securities Research & Selection (Front office) · Applies: PUB

Purpose

Maintains and revalidates the live research thesis on each candidate and held security. A recommendation (SD-02.5) is a point-in-time call; the thesis is the standing rationale behind it — why the security is held, what would prove the call wrong, and the conditions that should trigger an exit. This Service Domain keeps the thesis alive: it tests it before it is relied on, monitors it against new evidence, and enforces the sell discipline when it breaks. It owns the thesis on the security; SD-05.2 monitors the position. For the long-short, global-macro and event-driven hedge-fund substyles, SD-02.6 also maintains the strategy-level live thesis — the macro regime view, the event/catalyst situation thesis or the arbitrage thesis SD-02.1 originated — alongside the security-level theses on the instruments the strategy expresses through.

Service Operations

Author the thesis — state the thesis pillars, the supporting evidence and the variant perception — where the firm’s view differs from the market’s.
Stress-test the thesis — challenge it before it is relied on: pre-mortem, devil’s-advocate review, scenario modelling.
Monitor the thesis — evaluate new information against each pillar on a regular cadence, scored (a traffic-light / RAG scheme).
Revalidate the thesis — confirm or revise the live thesis as the evidence changes.
Detect thesis creep — catch the drift of a thesis away from its original basis to rationalise a held position.
Trigger sell discipline — fire the defined exit triggers when pillars break.
Run the exit / post-mortem review — record why a position was exited and what the thesis got right or wrong.
Maintain the strategy-level live thesis — for the long-short, global-macro and event-driven hedge-fund substyles, maintain the strategy-level thesis SD-02.1 originates: the macro regime view (rates, currencies, sovereign credit, commodities), the event/catalyst situation thesis (M&A, restructuring, index changes, regulatory triggers) or the arbitrage / spread-convergence thesis. Monitor it for regime change, catalyst materialisation and spread convergence, revalidate it as the evidence changes, and trigger the strategy-level exit when the regime breaks, the catalyst fails to materialise or the spread closes.

Inputs and outputs

Inputs: the strategy-level idea from SD-02.1 (the macro, event-driven or arbitrage thesis SD-02.6 maintains as the live strategy-level thesis for the hedge-fund substyles); the research views from SD-02.2 to SD-02.4; the recommendation from SD-02.5; company news, results and market moves; the research record (SD-02.7).
Outputs: the live, revalidated thesis, its RAG scorecard, the sell triggers and the exit-review record — consumed by SD-02.5 (which acts on a broken thesis) and by the portfolio managers of BD-05.

Entities

Consumes: Instrument / Asset (E-02), Listed Equity (PB-01), Debt Instrument (PB-02), Price & Market Data (E-08); the SD-02.1 strategy-level idea (for the hedge-fund substyles); the SD-02.2 research views; the SD-02.4 research views; the SD-02.5 recommendation; the SD-02.7 research record.
Owns: none — the thesis is an analytical artefact. Whether an Investment Thesis warrants a first-class entity, with the provenance and time-series the research record needs, is open.

Standards

No external standard governs thesis management. The named patterns are the discipline: variant perception, the pre-mortem, RAG / traffic-light monitoring, thesis-creep avoidance and sell discipline.

Open extensions

An Investment Thesis entity.
The boundary with SD-05.2 Portfolio Management & Monitoring — the thesis on the security versus the monitoring of the held position against the mandate.