Thought Leadership

The rapid equity market rebound following the historic drawdown in March 2020 has been anything but expected. Investors have continued to support mega-cap growth
stocks which appear to be significantly overvalued by a number of different measures. With multiple indicators signaling significant risk based on historical trends, investors would be prudent to prepare for a market correction and shift to a more valuation-based assessment of the currently in-favor growth stocks.

Historical evidence suggests that periods of outperformance by negative earning stocks is not a new phenomenon. This outperformance has tended to be cyclical, not persistent, and concentrated around speculative environments.

Growing public and regulatory pressure is increasing the availability of climate risk data and analytical tools, allowing asset managers to quantify risks and opportunities in security analysis, supporting their efforts to maximize risk-adjusted returns.

During the last decade, factor momentum has degraded, favoring shorter-term factors and reversal, which is more difficult to capture at the portfolio level. The implementation shortfall associated with factor timing strategies can be addressed by applying a time-weighting function to counter short-term cyclicality. Our approach works to harness the power of longer-term factor rotation to generate higher risk-adjusted alpha accompanied by lower turnover.