MDT Advisers is the active quantitative equity arm of Federated Hermes. MDT is a US equity-focused investment manager; today we manage nearly US$12bn across several US equity strategies, including a market neutral strategy. While the name ‘MDT’ may not be familiar to you, we have been around for quite some time. In fact, we’ve been managing active quantitative US equity strategies for decades, with our first strategy launched back in 1991.
Our strategies are designed with a goal of not only delivering positive relative performance for our clients, but we’ve designed our process with the intent to seek to deliver this positive relative performance with as much consistency as possible. In pursuit of this goal, we believe that the portfolio needs to be built in a way that allows it to have the potential to outperform in a variety of market environments, to have an all-weather capability to it.
Many active portfolios are often built in a manner that leaves them with structural active factor risk exposures. These structural factor risks can lead to positive performance outcomes over the longer term, however, the cyclicality in factor performance can lead to heightened volatility and prolonged periods of underperformance over the medium term. Clients in these types of active portfolios are required to potentially ride a relatively bumpy path to achieve that positive long-term outcome. We view this performance experience as a problem for many clients.
An investment process that can identify a diversified range of potential alpha sources to build a portfolio around, where these alpha sources are not highly correlated to each other, can equip the portfolio with the potential to add value regardless of the market environment. We believe this diversification of potential alpha sources, alongside a disciplined, risk-efficient portfolio construction process, can provide the opportunity to deliver more consistent, durable, all-weather performance outcomes for clients, performance that is driven by skill-based alpha.
At MDT, our risk-managed investment approach seeks to identify a broad range of alpha sources to consider for investment, utilising a process that I think you’d find to be quite different than other equity approaches, different even from other quantitative equity approaches.
