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Systematic Global Equity

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Institutional Strategy > Equity > Systematic Global Equity

Systematic Global Equity

A global equity strategy that seeks to outperform its benchmark over a full market cycle on an absolute and risk-adjusted basis, while managing tracking error

  • Experienced team with a long history of technology driven, factor-based investing
  • Multi-dimensional framework selects stocks based on a combination of fundamental and technical characteristics
  • Disciplined approach is rooted in risk management and seeks diversified sources of alpha

Key Risks

Market Risk: The risk of a change in the value of a position as a result of underlying market factors, including among other things, the overall performance of companies and the market perception of the global economy.
Liquidity Risk: The risk that the portfolio may be unable to sell an investment readily at its fair market value.
Model Risk: The investment strategy of a portfolio using a quantitative investment approach is rules based and model-driven. Therefore, it would not necessarily result in a security being sold because that security’s issuer was in financial trouble or defaulted, or had its credit rating downgraded, unless such indicators are tracked by the investment strategy of that portfolio. There is no guarantee that the investment strategy of such a portfolio will meet the purpose for which it was designed.
Emerging Markets Risk: Emerging markets are likely to bear higher risk due to a possible lack of adequate financial, legal, social, political and economic structures, protection and stability as well as uncertain tax positions which may lead to lower liquidity. The value of a portfolio may experience medium to high volatility due to lower liquidity and the availability of reliable information, as well as due to the strategy's investment policies or portfolio management techniques.
Derivatives Risk: The strategy may use certain types of financial derivative instruments (including certain complex instruments). This may increase the portfolio’s leverage significantly which may cause large variations in the value of investments. Investors should note that the strategy may achieve its investment objective by investing principally in Financial Derivative Instruments (FDI). There are certain investment risks that apply in relation to the use of FDI.
Counterparty Risk: The risk that the portfolio may be unable to sell an investment readily at its fair market value.
Operational Risk: The risk of direct or indirect loss resulting from inadequate or failed processes, people and systems including those relating to the safekeeping of assets or from external events.
Currency Risk: Investments in a currency other than the base currency of the portfolio are exposed to currency risk. Fluctuations in exchange rates may affect the return on investment. If the currency of the portfolio is different from your local currency, then you should be aware that due to exchange rate fluctuations the performance may increase or decrease if converted into your local currency.

 

Overview

Investment Philosophy

We believe:

  • Markets are not perfectly efficient, which creates alpha opportunities
  • Economic intuition and sound fundamentals are crucial to our investment process
  • Integrating multiple investment views in a consistent way offers one of the most attractive opportunities for outperformance
  • Disciplined portfolio construction and robust risk management are critical to outperformance over time
 

Investment Process

Investment Themes

  • Investable universe consists of approximately 5,500 developed world stocks within major stock indices
  • Compare stocks based on fundamental factors within five key themes: Valuation, Earnings Quality, Operational Efficiency, Price Dynamics and Sentiment

Factor Timing Model

  • Forecast factor returns under different market environments

Forecasting Returns

  • Combine the factors using a modified Black-Litterman approach
  • Derive return forecasts for all stocks in our investment universe

Develop Country / Currency Views

  • Develop independent views on country and currency selection as an overlay to security selection portfolio

Portfolio Construction

  • Optimize portfolio based on portfolio guidelines and client constraints
  • Target tracking error 200–600 bps
  • Stock specific active weights no more than 3%

Final Portfolio

  • 150–350 stocks
  • Daily monitoring of proprietary risk report to assess active risk and aid in rebalancing
  • Portfolio manager review of all steps
 

Signals Based on Fundamental Themes

Example: "Valuation" theme seeks attractive valuations resulting from mispricing

The "Enhanced Value" signal seeks to avoid the "Value Trap". We prefer to overweight undervalued stocks that also exhibit improving fundamentals and underweight growth stocks that exhibit deteriorating fundamentals.

Management

Ray Carroll, PhD, CFA
Chief Investment Officer—Breton Hill
22 Years of industry experience
2 Years with Neuberger Berman
Ping Zhou, PhD
Senior Portfolio Manager
14 Years of industry experience
13 Years with Neuberger Berman