Portfolio construction and management are primarily based on actively weighting regional and sector allocations against a fund’s underlying benchmark along with a thorough analysis of the risks associated with these weightings.
Adhering to each fund’s investment objective, the Investment Management Team constructs the portfolios based around each fund’s respective benchmark by using the key investment themes to identify sectors and or regions to overweight and underweight. To execute their strategies, the managers draw from a universe of companies that meet our combination of rigorous financial and sustainability analysis.
Risk control is a fundamental element in constructing the portfolios. Great care is taken in understanding the risks associated with implementing our strategy as we believe our approach helps us identify both intended and unintended risks to the portfolio. The Investment Management Team reassesses the portfolios on a consistent basis to monitor risk and return and determine whether any rebalancing is necessary. At the individual security level, we look at a company’s business risk, beta1, standard deviation2 and portfolio weight, and its potential impact to the overall portfolio. At the portfolio level, we look at sector concentration, beta, alpha3 and upside/downside capture4, among other factors, to determine the overall risk of the portfolio versus its benchmark.
1Beta coefficient measures an investment’s relative volatility or impact of a per-unit change in the independent variable (market) on the dependent variable (portfolio), holding all else constant.
2Standard Deviation measures a fund’s variation around its mean performance over time. Higher figures indicate greater volatility.
3Alpha is a coefficient measuring risk-adjusted performance, considering the risk due to the specific security, rather than the overall market.
4Upside/Downside Capture Ratio is the average of the differences between the price movements of the fund and those of the underlying benchmark.