Asset classification alone doesn’t give us the full picture. Instead, we determine the main drivers of the variability in returns for each asset class (we call these factors). We look at both short term and long-term forecast returns for these factors, because not all risks are compensated, and we want to ensure we are being adequately compensated for taking on risk in our portfolios.
Focusing on diversifying by factors and not simply by asset class, allows us to construct portfolios that are better diversified and more robust in times of market uncertainty.
We approach portfolio construction in a systematic fashion, developed through rigorous testing of academic research throughout time. The numbers lead the process, helping us avoid behavioural biases in our own decision making. We use our investment expertise to determine the best course to reach our destination, but never deviate from the direction our systematic process is telling us to go.
This has led to performance outcomes that are consistent through diverse market environments. Our live track record since 2012 demonstrates this.
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