There is no guarantee that research capabilities will contribute to a positive investment outcome.
Systematic Investment Process Video Script
Systematic investment process [Title card]
The world is more data-driven than ever before. Our systematic process leverages vast sets of data, both traditional and alternative, to provide investment insights faster, at greater scale and with more granularity. We score and rank thousands of securities daily to help make investment decisions in real time, based on company fundamentals, market sentiment and macroeconomic themes.
Our fundamental signals perform the same analysis a traditional security analyst might. Our models leverage data and technology to systematically evaluate thousands of securities. Using alternative data, such as internet search, transaction activity, and geolocation data, we score the attractiveness of investment opportunities against more traditional accounting measures.
Our sentiment signals recognize factors other than fundamental strength can influence returns over shorter time frames. Sentiment signals analyze a broad range of market views from sell side1 analysts, company management, and other investors. Electronic text forms a large part of the underlying data that drives these insights and seeks to enable our models to identify where analysts and management are more positive (or negative) on a company’s outlook.
Our macroeconomic signals seek to form a view across groups of securities rather than individual companies. For example, we analyze the impact of positive hiring trends or adverse inflationary pressures across a universe of securities. We evaluate the impact of macroeconomic data among countries, industries, and equity styles, such as value and growth.
The final score for every security is a weighted combination of all signals, blending the views across these insights.
The final alpha score represents our assessment of the return potential of each security relative to all the others within the investible universe.
Portfolio Construction [Title Card]
Our investment process2 seeks to systematically capture the drivers of future returns, to create a portfolio that seeks to maximizes exposure to our signal views. We construct portfolios starting with these final alpha scores and size positions aligned with these scores. A market neutral portfolio would hold a long position3 in securities with a positive score, and a short position4 in securities with a negative score.
However, this doesn’t tell us anything about risk and implementation frictions such as transaction costs and constraints. To account for this, we take into consideration the expected return of a position, alongside an assessment of its potential risk using a multi-factor risk model.
Whether the portfolio being generated is a market neutral hedge fund designed to deliver an uncorrelated source of alpha, or a long only portfolio seeking to outperform a broad index of market exposure, the process is identical. The final output is intended to capture the broadest possible opportunity set within the target market, as we seek to achieve the best possible tradeoff between risk and return net of transaction costs.
