The Quantitative Canadian Equity strategy is a diversified, actively managed strategy that aims to provide long-term capital growth by investing in equity securities of Canadian issuers.
To achieve the strategy’s objectives, the investment team uses a fundamental quantitative investment process to build a portfolio that emphasizes traditional investment principles such as value and growth, while leveraging the advantages inherent to quantitative processes.
- Quantitative, actively managed core Canadian equity strategy.
- Proprietary quantitative model scores companies based on a balanced combination of multidisciplinary investment styles such as profitability, valuation, and growth potential.
- Portfolio built using optimization process to determine balanced combination of these factors.
- Dynamic and centralized team dedicated to proprietary research, including model enhancements, with emphasis on continuous development.
Investment philosophy and style
- The core philosophy that underlies our quantitative equity strategies is a belief that quantitative-driven processes can respond swiftly and systematically to market inefficiencies.
- Underlying the approach is the belief that portfolios with a better mix of the characteristics that drive stock returns over time – such as better valuations, profitability, and growth – will deliver superior returns relative to the market.
- The Quantitative Investments Team’s process assesses securities using seven security alpha factors derived from traditional fundamental investment principles:
- The other factors they consider – risk factors – are designed to assess individual company risk. Risk factors measure those characteristics of a stock that can impact returns, but where the direction and magnitude is unpredictable.
- Portfolio construction is done through an optimization process, followed by a trade review before trade execution.
- The optimization’s inputs are the team’s alpha and risk forecasts, quantified by the team’s proprietary factor model, in addition to constraints and transaction costs.
- The team scores companies based on their style characteristics (value, growth, profitability, etc.), and then combines them into a portfolio with a balanced combination of these factors. While the team is focused primarily on security selection, they will also tilt the portfolio towards sectors that score well.
- The team is cognizant that other unintended exposures within the portfolio could potentially overwhelm the positive contributions from the factors that are emphasized. Therefore, the process will also quantify and neutralize the impact of risk factors – such as currency, beta, or market cap size – as much as possible within the portfolio construction process.