1. Why would an investor include MDT US Equity in a portfolio today?
MDT US Equity is designed to perform across a wide range of market environments without relying on macroeconomic forecasts or style biases. The strategy intentionally avoids directional bets, aiming instead for consistent excess returns through diversified stock selection. This makes it a compelling alternative or complementary to both traditional active and passive strategies – especially in uncertain markets where valuation signals are mixed and thematic trends (like AI or interest rate shifts) may be short-lived.
2. How is the MDT portfolio constructed compared to traditional active or passive strategies?
MDT typically holds around 175 US stocks, significantly more than many active managers. Positions are modestly over- or underweighted relative to the benchmark (±2.5%), and sector weights are kept within ±1%. This approach avoids concentrated bets and ensures performance is driven by a broad set of alpha signals rather than a few high-conviction picks. Unlike traditional active managers, MDT does not meet with company management – it relies entirely on systematic modelling.
3. What constraints guide portfolio construction—such as maximum weights for individual stocks or sectors?
Stock-level constraints are ±2.5% relative to benchmark weight, meaning MDT can own more than 2.5% of a stock but not deviate more than that from its benchmark weight. Sector-level constraints are tighter at ±1%, reflecting the team’s view that they have no reliable insight into sector-level outperformance. This keeps the portfolio broadly sector-neutral and focused on stock selection.
4. How frequently is the portfolio reviewed and adjusted? What is the turnover rate?
The portfolio is optimized daily, with the investment model updated every night. While views don’t change dramatically day-to-day, this allows MDT to quickly reflect new opportunities. Annual turnover averages 60–75%, though it varies depending on market conditions. A transaction cost model ensures trades are only made when expected alpha outweighs costs.
5. What are some of the most notable recent portfolio changes?
Recent overweights include:
- Adobe – selected for its strong earnings momentum, attractive valuation, and high economic moat.
- AbbVie – favoured for valuation metrics (e.g., EBITDA/EV), cash flow, and price momentum.
- Viking Holdings – chosen for low share price volatility, good momentum, and balance sheet leverage.
These positions are modest but reflect the model’s ability to identify diverse alpha drivers.
6. Is the fund using derivatives to hedge market risks, or is it fully invested in equities?
The fund is fully invested, with only a small cash balance for liquidity. It does not use derivatives or take directional market views. Beta is managed to be close to 1, and all active risk is concentrated in stock selection.
7. Have you considered applying the MDT model to European equities or other regions?
While the modeling framework could be adapted to other markets, MDT is currently focused exclusively on US equities. The team has built its process using nearly 50 years of US equity data, and prefers to maintain focus rather than dilute attention across regions. Expansion is possible but not planned at this time.
For more on MDT, see Power in Data.
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