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Research Summary

  • Active Management

Be More Agile: A Flexible Approach to Equity Investing

September 30, 2011

Investors want reliable returns and, with bond yields near all-time lows, equities are an obvious choice. But the stock market losses of 2008 have made investors wary of the risks. We believe that a flexible portfolio that adapts to current market conditions can deliver a better risk-reward trade-off.

Almost all the clients we speak to are looking to limit their downside risks— whether they are high-octane hedge fund investors looking for annual returns above 10%, or pension funds willing to settle for high single-digit returns with lower volatility. To maximize return opportunities, we think investors should take advantage of both alpha and beta. But, to control risk, we believe that they should be flexible about how much beta exposure they take and the type of alpha exposure they choose—in other words, be more responsive to the prevailing investment environment.

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