Analytic Investors LLC (Analytic) aims to offer investors long-term returns by investing in a diverse portfolio of global equities with low volatility. Analytic was founded in 1970 and is based in Los Angeles. It provides quantitatively-driven investment management services to both institutional and retail investors.
The Analytic Global Managed Volatility Fund aims to achieve a long-term return (before fees and expenses) that equals to or exceeds the MSCI World ex Australia Index, in $A unhedged, with net dividends reinvested (Benchmark), at a lower volatility level (measured by the standard deviation of returns).
The fund provides exposure to global equities with lower forecasted volatility when compared to the Benchmark.
Analytic believes that while financial theory would suggest that the more risk an investor takes on the higher their return will be, the reality is that this has seldom played out in equity markets.
Through detailed internal research and published academic research, Analytic has found that there is no material long-term relationship between risk and return in equity markets. In essence, stocks with low volatility have kept pace with stocks with high volatility over the long-term.
In constructing a portfolio of low volatility global equities with benchmark-like returns, Analytic uses a quantitative, risk-based approach that focuses on identifying the risk characteristics (volatility measures) of individual securities and forecasting risk. It also uses an optimisation process, which attempts to calculate the most efficient combination of securities to produce a low volatility portfolio.
Analytic's investment team believes that there is no long-term relationship between risk and return in equity markets. In other words, over the long term stocks with low volatility tend to keep pace with stocks with high volatility.
Analytic's investment team also takes the view that the level of risk in global markets is constantly changing. Its dynamic investment process takes this into account by continually assessing both long-term and short-term risk levels. The investment team monitors the fund's portfolio of stocks daily and changes the portfolio composition both as market risks change, and as individual security risk and return forecasts change.