We utilize a quantitative approach for our top-level allocations and a discretionary approach for our individual equity positions.
Our quantitative research efforts are focused at the top end of the allocation pyramid where allocation decisions are most consequential - the academic evidence is clear that top-level allocations account for the majority of your performance, while sectors and individual stocks selections make a much smaller contribution. We build models that rely on sustainable logic - not anomalies, patterns or cycles, which are not likely sustainable over the long term. This entails understanding and modeling the interplay between economics, valuations, and behavioral factors.
Our discretionary research is more opportunistic and focused at the individual stock level. This generally entails screening stocks on a combination of fundamental and technical factors and then performing rigorous fundamental research and analysis on ideas we choose to evaluate further. As a cardinal rule, all stocks are first filtered through a valuation process; i.e. we are only long stocks that we determine are fundamentally cheap and wish to own for the long-term, and only short stocks that we determine are fundamentally expensive.
Our Actavest Long/Short Equity Solution combines both of the above approaches into a single long/short equity strategy. Our quantitative models guide our overall market exposure, and our discretionary research identifies individual stocks that are then tilted in line with our overall market outlook.