The investment philosophy underpinning our Global Dynamic Strategy is predicated on the following beliefs:
- Persistent growth and value anomalies exist in markets caused by behavioral biases of market participants.
- These anomalies can be exploited through combining disciplined stock screening processes with fundamental validation.
- Return is most efficiently captured by disciplined portfolio construction that results in an array of stocks diversified by sector, size and region.
- Stocks are selected on their fundamental merits rather than with a focus on benchmark weight.
The Global Dynamic strategy capitalizes on our significant experience selecting stocks based on behavioral finance theory. Our pioneering work in behavioral finance has trained our team to identify and exploit anomalies that exist at the extremes of the growth and value spectrum of the equity market. We are able to identify anomalies driven by behavioral biases that can remain in place over long periods. These anomalies result from the tendency of parts of the market to outperform or underperform in a sustained manner. For example, stocks often fall out of favor with investors, driving share prices below intrinsic value. Likewise, investors often sell fast-growing stocks too early, despite a continuation of positive news, earnings and price momentum. Our own analysis and third party research has shown that sustained excess return can be achieved by investing in high quality stocks that display extreme value and growth characteristics.
The first stage of the Global Dynamic investment process uses a proprietary quantitative screening methodology that monitors growth and value metrics for over 3,000 stocks on a daily basis, ranking the most attractive companies on these characteristics.
The conclusions from this first stage of analysis are then validated, ensuring that companies are fundamentally sound, as well as attractively ranked on our quantitative screen. This validation is performed by our London-based team of 11 global sector specialists who work closely with the approximately 200 investment professionals around the world who perform detailed research into companies.
Finally, in the portfolio construction phase, we ensure that investments are made on merit and not market capitalization. As such, the portfolio will invest in approximately 200-300 broadly equally-weighted positions in order to capture the targeted value and growth style tilts while minimizing other biases, such as individual stock-specific risk. The regional and industrial sector weights of the MSCI World Index are then used as a loose framework for portfolio construction to ensure diversification.