A mix of geopolitical stresses, political instability, monetary policy tightening and, more recently, global trade tensions, have dominated international news flow – and impacted equity markets – in the last 12 months. Amid such volatility, our all-weather approach enabled us to focus on time-tested company fundamentals.
Our proprietary Alpha Model assesses a company’s long-term prospects, by identifying those with the most attractive combination of fundamental characteristics or “factors”. It is then used to create a portfolio that aims to generate consistent, positive relative returns regardless of market direction or the wider geopolitical environment.
In this issue of Equitorial, we explain how our model-driven fundamental analysis has generated consistent alpha during a 12-month period of heightened volatility.
Defining factor investing
For Hermes Global Equities, consistency is key. We believe that the best way to generate superior consistent returns is to apply a systematic approach, which minimises behavioural biases, with disciplined subjective analysis. To do so, we cannot simply categorise ourselves as value, growth, or indeed, quality investors. Such style portfolios can deliver excess returns to the patient investor over the long term, but by definition no form of style investing works consistently. For this reason, we classify our investing style as ‘core’.