We seek to combine independent sources of alpha from Wellington Management’s broad array of investment approaches using proprietary risk research.
Our multi-manager solutions team has developed key principles that encapsulate the team members’ strongly held beliefs, including:
- High active share is a useful measure of alpha potential, a critical element in structuring equity allocations, and a defense against closet indexing. This principle is based on the team’s belief that the potential to generate alpha increases as managers differentiate their portfolios from their benchmarks. Moreover, it helps guide the team’s efforts to ensure alpha potential remains high when constructing multi-manager portfolios for clients.
- The impact of risk factors on returns has increased materially and, given structural changes to markets, is unlikely to decline. In addition, the team members believe risk factors are more nuanced and numerous than the classic “nine style box” would suggest. Therefore, they have created a detailed proprietary risk-factor framework that they employ in internal risk analysis and in the management of client portfolios.
- Investment decisions should be guided by risk considerations. The team’s manager allocation process, factor research, and risk tools. As a result, they typically have a mandate to pursue alpha for clients but with a specific risk profile.