Correlations in “growth” and “value” equity factors may undercut the diversification benefits of benchmark-relative exposures to sectors and geographies. Consistent portfolio balance by “styles,” though, can lower beta and lift alpha.
Flexible cross-asset oriented investment teams are positioned to assess fundamentals and valuations across discreet asset classes, facilitating relative value tradeoffs and improving the potential for superior risk-adjusted returns.
Back tests and limited data sets don’t create a solid foundation for future returns, or obviate the need for judgment around select risk exposures and portfolio construction.
A company's efforts to improve its sustainability are often a better gauge of future success than its current ESG (Environmental, Social and Governance) score.