Products & Performance
Separately Managed Accounts
Applied Global Core Equity Strategy
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Applied Global Core Equity Strategy |
Products & Performance
Separately Managed Accounts
Applied Global Core Equity Strategy
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The importance of a flexible approach
The team believes in the importance of a flexible approach to investing. The risk of investing in only value stocks is that there are periods of time when growth outperforms value. Therefore, it is beneficial to be able to capture those changes in the context of a portfolio that offers the flexibility to do so.
The importance of Active Share
In addition, the team believes strongly in providing a strategy with high active share, yet with market risk. High active share in this case is achieved by having a fewer number of positions relative to other portfolio managers, yet attempting to maintain appropriate diversification, with the correlations of the positions minimized in order to reduce risk. The benefit is that any individual position has an opportunity to contribute to the portfolio results meaningfully rather than suffering the risk of results being diluted as would happen in a portfolio with a larger number of positions.
CAPITALIZES ON CURRENT MARKET FACTORS, UNCONSTRAINED BY STYLE |
Portfolio is positioned to gain exposure to broad market factors we believe are in the early stages of outperforming and will drive returns in the current market environment. |
STOCK-SPECIFIC RESEARCH ALSO ADDS VALUE |
Alpha from idiosyncratic (stock-specific) risk is sought by conducting research on individual stocks, customized to each company and its specific industry. |
FOCUS ON RISK MANAGEMENT |
Attempt to capture common and idiosyncratic factors without unintended exposures. |
1 | Determined dominant |
Using a trend-following proprietary factor momentum model, the team seeks to identify the style regime and common factors that they believe are driving the market, using the results to identify companies that provide desired factor exposures. |
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2 | Screen stocks |
Stocks are ranked by their relative exposure to desired factors, which narrows the universe to the top quintile (20%) of stocks in each region. |
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3 | Risk Decomposition |
The team optimizes the weightings of the positions in the portfolio in an effort to minimize correlation between positions. On an ongoing basis, they manage positions to ensure appropriate dependency on a single stock. |
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4 | Conduct research |
Stocks are analyzed individually, based on the idiosyncratic opportunities they offer. |
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5 | Final Portfolio |
Portfolio of high-conviction stocks is constructed. Stock weightings are determined by a stock’s exposure to desired factors, the confidence level of its idiosyncratic opportunity and its contribution to reducing intra-stock correlations within the portfolio.1 This represents how the portfolio management team generally implements its process under normal market conditions. 1The Global Core Equity portfolio typically has 30 – 60 positions. Weights and the number of securities provided are a typical range, not a maximum number. The portfolio may exceed this from time to time due to market conditions and outstanding trades. |