Downside mitigation supports higher cumulative results
In our experience, downside risk mitigation supports the potential for higher cumulative alpha over time. Here’s why: underperforming by 25% in down markets requires outperforming by 33% in up markets just to get back to neutral. Therefore, we believe that an effective active approach to managing an equity portfolio should be designed to limit downside when equity markets decline.
We think this can be accomplished in growth equity space in several ways: focusing on high-quality companies, maintaining a valuation discipline, avoiding companies with the most negative earnings estimate revisions, and constructing a portfolio that seeks to manage active exposures to stocks, sectors, and factors. We also maintain flexibility to position for downturns in the economic cycle.
Equity Market Outlook
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