Our Low-Volatility Equities capabilities include long-only global and global emerging equities strategies and a “pure” low-volatility long-only global equities strategy.

Our Low-Volatility Equities strategies aim to exploit the low-volatility anomaly: the observation that low-volatility portfolios have delivered superior returns and better risk-adjusted returns than traditional market capitalisation-weighted portfolios over the long run.

The strategies are managed by quantitative experts specialising in protected, indexed and model-driven investment. Ten experienced investment professionals from various specialist teams and Financial Engineering team are involved in running the strategies.

As well as offering the strategies in UCITS-compliant funds, we can also tailor mandates to meet your individual needs.

5

experienced investment professionals

3

low-volatility equities strategies

14 years

average investment experience

Investment Philosophy and Process

Low-volatility investing is a risk-managed investment approach based on the “low-volatility anomaly” first identified by Robert Haugen and subsequently explored and documented by other academics. These studies showed that over the long term, low-risk stocks have produced better risk-adjusted returns than higher-risk stocks. However, the first generation of risk-based equity strategies had particularly high exposure to defensive stocks and tended to underperform sharply in bull markets.

Our strategies aim to overcome this problem by investing in low-volatility stocks in every sector. Our research has shown that the low-volatility anomaly is observed across all equity market sectors – not just defensive areas. We therefore build portfolios exposed to a well-diversified selection of low-volatility stocks across the market.

Our investment process follows a fully systematic approach. Each month we generate a universe of low-volatility stocks by screening the whole MSCI universe and ranking stocks by volatility deciles in each sector. We then construct a model portfolio that invests in low-volatility stocks in each sector and that is subject to constraints in terms of ex-ante beta, targeted tracking error and turnover. Our pure low-volatility strategy produces a portfolio subject to no constraints, with the aim of maximising the benefits of the low-volatility anomaly.

  • Low-Volatility Global Equities

    Our low-volatility global equities strategy provides well-diversified exposure to global equities that exhibit low volatility of returns.

    It is a long-only strategy that aims to achieve a moderate tracking error against the MSCI World index rather than only focusing on minimising absolute volatility.

    The strategy has a 8-year track record.

    At a glance:

    • The portfolio invests in 100 stocks on average
    • Aims to outperform the benchmark over the long term with lower volatility of returns than the MSCI World index.
    • Targets an ex-ante beta of 0.8
    • Targets a tracking error against this index of 5–7%
    • Well-diversified low-volatility global equities strategy
    • Long-only strategy with no leverage
    • Fully systematic investment process based on an in-house quantitative model
    • Invests in all MSCI sectors – not just defensive sectors
    • Aims to generate higher returns with substantially lower risk than capitalisation-weighted global equity indices over the long term
    • Benefits from quantitative expertise
  • Global Emerging Low-Volatility Equities

    Our low-volatility global emerging equities strategy provides well-diversified exposure to global emerging equities that exhibit low volatility of returns.

    It is a long-only strategy that aims to achieve a moderate tracking error against the MSCI Emerging Markets index rather than only focusing on minimising absolute volatility.

    The strategy has achieved a 6-year track record.

    At a glance:

    • The portfolio invests in 100 stocks on average
    • Aims to outperform the benchmark over the long term with lower volatility of returns than the MSCI Emerging Markets index.
    • Targets an ex-ante beta of 0.8
    • Targets a tracking error against this index of 7%.
    • Well-diversified low-volatility global emerging equities strategy
    • Long-only strategy with no leverage
    • Fully systematic investment process based on an in-house quantitative model
    • Invests in all MSCI sectors – not just defensive sectors
    • Aims to generate higher returns with substantially lower risk than capitalisation-weighted emerging market indices over the long term
    • Benefits from quantitative expertise
  • Pure Low-Volatility Global Equities

    Our pure low-volatility global equities strategy provides well-diversified exposure to global equities in the lowest volatility decile and that therefore have low beta.

    It is actively managed and benchmarked against the MSCI World index.

    The strategy has a 6-year track record.

    At a glance:

    • The portfolio invests in 150 stocks on average
    • Stocks equally weighted in each sector and sectors weighted such that they make an equal contribution to overall risk.
    • Aims to outperform the benchmark over the long term with lower volatility of returns than the MSCI World Index
    • Does not impose a tracking error constraint.
    • Well-diversified low-volatility global equities strategy with no tracking error constraint
    • Long-only strategy with no leverage
    • Fully systematic investment process based on an in-house quantitative model
    • Invests in all MSCI sectors – not just defensive sectors
    • Aims to generate higher returns with substantially lower risk than capitalisation-weighted global equity indices over the long term
    • Benefits from quantitative expertise