Institutional Strategies

Asset Strategy

The strategy seeks to provide total return by allocations to asset classes of varying correlation around the globe. It blends an Equity Sleeve and a Diversifying Sleeve to seek a rate of return competitive with global equities, as represented by the MSCI ACWI Index, with a reduced level of volatility versus that index over a full market cycle.

Investment Philosophy

The strategy’s investment philosophy reflects an evolution of its process, which seeks to generate global equity-like returns with below global equity risk. We believe superior risk-adjusted returns can be achieved by blending asset classes of varying correlations; evaluating assets across the globe using relative value as well as a complete analysis of the total capital structure of an asset is critical for value creation over time; and investing in non-correlated assets allows for risk mitigation and diversification.

Investment Process

We start by constructing an equity portfolio that we believe can outperform the MSCI All Country World Index (ACWI) over a full market cycle. We then look at the total return potential and diversifying benefits of other asset classes to determine our diversifying portfolio asset allocation around the base equity allocation.

Equity Sleeve

We seek well-positioned companies with strong and/or growing market share in attractive industries across the globe, which can result in cash-generating ability and stable-to-improving margins and returns. We apply our relative-value framework to determine to what extent these expectations are reflected in valuations. We largely are indifferent to growth or value, as long as the companies are competitively advantaged with valuations that do not reflect the strength of their business models.

Asset strategy Diversifying 

Diversifying Sleeve

The diversifying portfolio seeks to provide a medium for attractive return streams in assets with significantly less correlation to the equity portfolio and to provide a medium for risk diversification. It can include global credit issues — including the full spectrum of credits from investment grade to high yield, emerging market sovereigns and corporates, and Treasury bonds, bills and TIPS — as well as bank loans, mortgage and mortgage REITs, gold/precious metals, commodities and cash.

Asset Strategy Diversifying
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Key Features

Composite Performance History Since 03/01/2006
Benchmark MSCI All Country World Index (ACWI)
Market Capitalization Generally target equities with more than $50 million in daily liquidity; may reduce to $25 million in selected international markets where exposure otherwise unavailable.
Bonds – benchmark-sized bond issues to help ensure a better level of liquidity.
Annualized Turnover Target 40–60%
Tracking Error 200–500 basis points versus benchmark index.
Cash Allocation Target cash position and normal range are equal to or less than 3% in normal market conditions.
Risk Management We strive to maintain a level of expected total risk between 70% and 90% of the MSCI ACWI.
Portfolio Construction
  • Equity Sleeve (Base allocation: 65% of Total; range 50–80%)
  • Diversifying Sleeve (Base allocation: 35% of Total; range 20–50%)
Security Concentration Typically 50–70 companies; maximum weighting of greater of 5% or 1.5 times benchmark weight at inception; assets in diversifying portfolio have same weighting criteria as equities and are sized by diversification benefit they provide to portfolio.
Investment Vehicles
  • Institutional Separate Account
  • U.S. Mutual Fund: Institutional Share Class
  • Variable Insurance Portfolio