Dynamic Value Strategy

Dynamic Value Strategy

Dynamic Value Strategy

 
 
Summary

Dynamic Value is a concentrated U.S. value equity strategy. The strategy seeks to identify the cheapest U.S. Stocks (Value stocks) using a proprietary, multi-factor, systematic framework. In addition, the strategy dynamically manages exposure to Value stocks and Anti-Value stocks (the most expensive stocks) based on their relative attractiveness: 

  • When Value stocks are most attractive relative to historical averages, the strategy will target +130% in Value stocks and -30% in Anti-Value stocks.1
  • When Value stocks are at their least attractive levels relative to historical averages, the strategy will target +70% in Value stocks and +30% in Anti-Value stocks.
     

Investing in Value and Anti-Value positions will be done directly and through derivatives.

 
 
Investment Approach
Philosophy

Value stocks have outperformed the broad equity market over the long term, with periodic downcycles.2  After a recent severe downcycle, we believe that Value, properly defined, will continue to outperform.  Moreover, Value is particularly attractive currently, given very cheap starting valuations and improving support from fundamental dynamics.  We believe Value is on the cusp of a structural bull market, driven by a regime shift from “Low Nominals” (low growth, interest rates, and inflation) to a higher nominal growth, interest rates, and inflation environment. 

The Dynamic Value strategy seeks to provide a more dynamic and concentrated approach, compared with traditional Value investing.

  1. The proper definition of Value is key.  Our multi-factor approach to identifying Value stocks results in a high active share portfolio, unlike passive Value index-replicating exchange traded funds (ETFs) which have a high overlap with broad market indices. 
  2. Despite Value’s long-term outperformance, Value has historically experienced periodic downcycles, and there are times when Value will be more or less attractive compared with history.  The strategy is designed to dynamically increase/decrease exposure to Value stocks and sectors depending on the attractiveness of Value relative to Anti-Value at a given point in time. 
 
Differentiators
Our approach means Value investing is never out of style

With the ability to dynamically manage exposure to Value and Anti-Value, we believe that the strategy can generate alpha in a variety of market environments.

Value Properly Defined

The GMA team definition of Value, which is multi-factor and equal weighted, is more precise and tries to avoid the sector and capitalization biases inherent in passive Value indices.

Significant team experience

Investment team brings a 20-year track record applying a Value-oriented approach to global multi-asset investing

 
Investment Process

I. The Global Multi-Asset (GMA) Team's well-established research process and investment discipline is leveraged in this innovative approach to value investing

II. Value & Anti-Value stock portfolios determined systematically, managed tactically based on attractiveness of value stocks 

This information represents how the investment team generally applies its investment process under normal market conditions. The team implements positions either directly by purchasing securities or through the use of derivatives.