Seeing Things Differently — A Singular Approach to More Sustained Alpha
A number of the Global Focus Equity strategy's overweight holdings are to the sensor and chip-related companies on the forefront of AI driving everything from productivity to drug discovery to our more efficient and livable "smart cities."
Important Risk Disclosure
The Fund invests primarily in equity and equity-related securities in global markets and may be exposed to additional risks (e.g. equity, market volatility, portfolio concentration, country selection, Eurozone debt crisis and investment in Russia risks, etc).
The Fund may use financial derivative instruments (“FDI”) for efficient portfolio management (including hedging) purposes only but will not use FDI extensively for any purpose. The use of FDI may expose the Fund to various risks such as counterparty, liquidity, correlation, credit, volatility, valuation and settlement risks.
Dividends, if any, may be paid out of capital of the Fund at the discretion of the Manager. This amounts to a return or withdrawal of part of an investor’s original investment or from any capital gains attributable to that original investment and may result in an immediate decrease in the net asset value of the Fund.
Investors may be subject to substantial losses due to investment loss risk and the leveraging effect of using FDI.
Investors should not rely solely on this material to make investment decisions.
Part of the Problem with Not Being Different
The concentration of indexes in many of the same stocks most affected by last year’s market downturn meant that even passive investors spent two years riding a roller coaster back to where they started.
PineBridge Global Focus Equity Fund’s unique approach to generating alpha from stock-specific sources has allowed it to create a high-conviction strategy with a simlar risk profile as the benchmark. But with quite a bit more potential for outperformance.
i, iii As of 30 June 2023. Reflects the statistics for the PineBridge Global Focus Equity Fund. ii Source: Morningstar, as of 30 June 2023. Reference class: Y. The peer group is the Morningstar Global Large Cap Core Equity Universe, which in the 3-year period had 1,513 members. Performance is calculated net of fees on NAV to NAV in USD with dividends reinvested. The benchmark for the Fund is the MSCI All-Country World (ACWI) Daily Total Return (Net) Index. Past performance is not indicative of future results. iv Source: PineBridge and Morningstar. Reflects the statistics for the PineBridge Global Focus Equity Fund as of 30 June 2023.
Out of Style: Building an Equity Portfolio Resilient to Factor Shifts
2022’s market volatility challenged the long-running supremacy of growth investing and potentially even the efficacy of growth or value as standalone investment strategies. In our recent paper, we argue that it’s not a case of either-or or neither, but how to use growth and value as inputs as part of a consolidated stock selection process to navigate style shifts and volatility across market cycles.
Source: Fama-French factor returns for the US. Chart shows the cumulative High Minus Low (HML) factor return from June 1926 (June 1926 = 100) through April 2023 defined as the averagereturn on the Small Value and Big Value portfolios minus the average return on the Small Growth and Big Growth Portfolios.
Join Rob Hinchliffe, Global Focus Portfolio Manager and Head of Industry Clusters, as he takes us behind the research behind the strategy’s outperformance through each twist of the recent dramatic shifts. In this session, he speaks to how “growth” and “value” have always been rather fluid concepts. And how the team’s more adaptive approach to valuing companies’ growth prospects helps them identify long-term alpha opportunities and achieve a deeper level of diversification to market cycles and style breaks.
Is categorizing stocks by sectors or industries the best approach? Take Toyota and Tesla, both assigned to the automobile industry group of the Consumer Discretionary sector. Can you think of two more different companies in terms of their stage of growth or how their shares are priced by the market?
For illustrative purposes only. Information provided should not be construed as a recommendation to buy or sell a security. There is no indication given that the security shown was purchased, sold or recommended in any portfolio. Any views are the opinion of the Investment Manager and are subject to change.
That’s why we assess and value companies based on comparisons within their lifecycle stage, from early to mature. This proprietary Lifecycle Research (LCR) framework gives us a more accurate reading of a company’s relative potential, which is fortunately overlooked by investors using the standard forms of categorization.
For illustrative purposes only.
But that’s not all. As the name implies, Lifecycle is about movement, and the opportunity to anticipate and capture changes in a business as it evolves over time. Stocks don’t need to change categories to be good investments. But when they do, we want them shifting leftward on the following diagram, from a more mature or cyclical company to one with a higher, sustained growth rate and the higher multiple that tends to command in the market
Seeing Beyond the Short Term in the Hunt for Alpha
Being active and selective has become even more important in an investment landscape where volatility has made it more likely for short-term views to be wrong rather than right. Many market participants continue to debate the likelihood of recession and the latest inflation and interest rates news. We're more focused on a three- to five-year horizon, and a handful of key structural themes that we see already propelling some stocks currently flying under the radar toward the belly of the Lifecycle curve.