Investment Approach
We believe that superior long-term performance, relative to a client-specified target index, may be achieved by following an objective, time-tested discipline that:

Adapts stock analysis to reflect changing market and economic conditions.

Reduces the likelihood of holding poor performers.

Maintains diversification for risk management.

Investment Process

Proprietary Factor-Modeling Process
The Enhanced Equity Index management team uses a proprietary factor-modeling process that is attuned to the changing economic and market conditions and tested in a wide range of markets.

We track the historical performance of each “factor” (growth/value, earnings variability, P/E, etc.) against relevant economic and market data, then apply the measured relationships to today’s economic conditions. By projecting the likely return on each factor, as well as its risk, we generate a diversified management strategy.

Rigorous Security Evaluation
For each index security, the projected performance for each factor is multiplied by the security’s sensitivity to that factor. The accumulated total performance projection becomes our projection for each stock.

Portfolio Optimization
The team uses sophisticated quantitative optimization tools to capture expected portfolio return within sharply defined risk constraints.

We set index-like diversification targets to minimize underperformance:

Portfolio sector weights close to index weights

Portfolio characteristics close to index characteristics

Weight for each stock in the portfolio close to its index weight, typically ±2%

Risk is “budgeted” so that the final portfolio takes risk in proportion to the various opportunities. The optimization produces a portfolio with the opportunity for consistent outperformance on the basis of our insights.

Portfolio-Specific Risk Management

The team reviews stocks regularly for up-to-date fundamental data, rebalancing the portfolio as needed.

The relevance of each evaluation method is monitored to determine the effect of any change in market and economic conditions.

The performance of sectors, styles, and stock attributes is tracked and analyzed to help guide subsequent strategic implementations.

The fund stays fully invested.