Quantitative Equity
- Our quantitatively driven equity strategies reflect the core belief that companies with positive business momentum — strong and accelerating earnings growth, balance sheet strength, and attractive valuations — offer investors the best long-term opportunities.
- Extensive quantitative screening and a disciplined ranking process help us identify companies that could be overlooked by a purely fundamental approach and avoid companies with too much inherent risk.
- This approach is adaptable to different benchmarks and investable universes, and the large asset base proves the process is scalable.
We believe:
- Companies with positive business momentum, earnings quality and attractive valuations offer the best long-term opportunities
- We will add value over benchmark returns by
- Quickly and efficiently evaluating all the stocks in the Index
- Identifying under-recognized opportunities
- Managing and controlling all fundamental and performance risks
Our research has identified several fundamental factors that affect the returns of common stocks. The problem is to smooth out the immense volume of financial and economic information to identify the underlying relationships that will influence stock prices going forward, and to eliminate or disregard the errors and inconsequential data. The device we have used in our investment research for many years is a mathematical factor model. The factors represent sources of returns, and the computer allows us to instantly analyze a large “opportunity set” of possible investments, and rank them from best to worst in terms of their likely stock price behavior. The effectiveness of the model depends on the factors identified for its implementation. We use 15 years of historical performance data and employ multiple regression techniques to test the ability of the model to explain variations in past returns and predict future stock performance. The weight, or importance, assigned to each factor in the calculations is also critical.
For the universe relative ranking, we categorize factors into three clusters that we believe have the greatest predictive ability and sound fundamental basis for identifying positive business momentum at a reasonable price. Following are examples of factors for each of the three clusters:
