Decision-Making Process

Portfolio Construction

Portfolios are fully invested and optimally diversified. We make controlled, stock-specific bets across many names in each of our 13 sectors. Benchmark-relative portfolios are sector-neutral to their target benchmark. However, gross sector exposure is unconstrained in our managed-volatility work. It is also unconstrained in our dollar-neutral long/short portfolios, although such portfolios are sector-neutral long versus short.

Minimum position size, at cost, is 0.3%. Maximum position size is determined by
a security’s weight in the benchmark and is limited to 1.2% (at cost) over the benchmark weight. For a non-benchmark name (or a non-benchmark strategy), 1.2% is the absolute maximum weight. Portfolios hold an average of 70 to 200 names (per side for long/short), depending upon the strategy. Generally, the smaller the targeted capitalization of a strategy, the more names held.

Portfolio rebalancing is systematic and disciplined. Purchases and sales are driven by changes in valuations from the ongoing evaluation of our investment universe, tempered by anticipated transaction costs. Portfolios remain fully invested at all times.