Allianz Global Equity High Alpha Strategy
Allianz Global Investors’ global equity approach is to invest in an integrated portfolio, comprising the best stocks in the world selected on a bottom-up basis. Global Equity High Alpha distils stocks into diversified yet concentrated portfolios selected on a truly global basis.
Philosophy
“Fundamental research and superior stock selection can generate long-term excess returns for our clients”
Our philosophy and process aims to construct well-balanced, concentrated global equity portfolios. We do this by identifying quality companies at reasonable valuations that have the market position and brand strength to successfully access structural growth opportunities.
There are many reasons to invest in our global equity portfolio, not least for the diversification opportunity that a global investment universe provides including:
- Global equities are inefficient1: Cross border anomalies, imperfect information flow and off-benchmark opportunities in addition to investor home country bias and the breadth and depth of the asset class, mean that risk and return can be more efficiently combined in a concentrated global portfolio.
- Alpha generation: Global Equity High Alpha typically generates a high Information Ratio when company fundamentals are the most important drivers of share prices, as they tend to be over time. In the normal environment of low correlations, share price performance within and between sectors can vary greatly, thereby creating opportunities for alpha generation based on bottom up stock selection.
- High Active Share: Our highest conviction holdings have consistently outperformed2. As a result, we have systematically concentrated the portfolio and prudently increased active share in order to maximise the strategy’s alpha generation.
- Stable and experienced global equity team: Our senior portfolio management team has an average of over 19 years investing experience. The team combines its intellectual capital with the fundamental proprietary research conducted by our global research platform in order to obtain a deeper understanding of the risks and opportunities embedded in every investment idea.
- In-house, truly global research platform: Dedicated global sector-based career analysts alongside a specialist global ESG research team and Grassroots Research, a proprietary research entity, ensure the Global Equity High Alpha team are able to identify market inefficiencies and create alpha using fundamental, bottom up stock picking.
Process
Allianz Global Investors’ investment process is based on three key elements: idea generation, stock selection and portfolio construction.
Idea generation: Fundamental analysis is the cornerstone of idea generation and is used to identify those companies that exhibit strong balance sheets, greater than market growth prospects, quality of earnings, positive cash-flow, high barriers to entry and unique product niches.
Investment ideas are leveraged from across the firm’s strong resources and external contacts including dedicated global sector-based career analysts, Grassroots ResearchSM, ESG Research and Company Engagement, and Chatter – our propriety interface and repository for research globally.
Stock selection: The ability of a company to successfully increase product revenue is a prerequisite for earnings growth over the long-term. However, the quality of the growth needs to also be considered since non-profitable sales growth will not translate into earnings growth. From the investable universe of stocks where our analysts conduct full and rigorous fundamental analysis, the sector based analysts identify stocks which meet our criteria for high quality and attractively valued companies with long term growth prospects.
Portfolio construction: Portfolio construction is formally discussed by the Global Equity Team at a weekly meeting. The meeting is also joined by representatives from Grassroots ResearchSM and other investment professionals where input may be required on stock specific issues. The meeting includes a review and attribution of the recent portfolio performance, the structure of the current portfolio and any potential changes to the existing positions. Performance and risk management are central to our investment process. For portfolio controlling we employ the multi-factor model, which delivers risk parameters such as tracking error, portfolio beta and volatility. To control the overall portfolio risk relative to the underlying benchmark, we have defined a risk budget. Sector weightings are the result of the bottom-up single stock selection. Nevertheless, portfolios are analysed for total risk and relative risk (tracking error) to reveal how risk budgets are deployed in portfolio construction.
1. Robert Shiller (1981), “Do stock prices move too much to be justified by subsequent changes in dividends?” The American Economic Review, Vol. 71, No. 3, (June 1981), PP. 421-436.
2. Allianz Global Investors, Allianz Global Equity High Alpha benchmarked against MSCI World Index.
GrassrootsSM Research is a division within the Allianz Global Investors group of companies that commissions investigative research for asset management professionals. Research data used to generate GrassrootsSM Research reports are received from reporters and field force investigators who work as independent, third-party research providers, supplying research that is paid for by commissions generated by trades executed on behalf of clients.
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Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested.
Past performance is not a reliable indicator of future results. If the currency in which the past performance is displayed differs from the currency of the country in which the investor resides, then the investor should be aware that due to the exchange rate fluctuations the performance shown may be higher or lower if converted into the investor’s local currency.
The views and opinions expressed herein, which are subject to change without notice, are those of the issuer companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or wilful misconduct. The conditions of any underlying offer or contract that may have been, or will be, made or concluded, shall prevail.
This is a marketing communication issued by Allianz Global Investors UK Limited, 199 Bishopsgate, London, EC2M 3TY, www.allianzglobalinvestors.co.uk. Allianz Global Investors UK Limited, company number 11516839, is authorised and regulated by the Financial Conduct Authority. Details about the extent of our regulation are available from us on request and on the Financial Conduct Authority's website (www.fca.org.uk). The duplication, publication, or transmission of the contents, irrespective of the form, is not permitted; except for the case of explicit permission by Allianz Global Investors UK Limited.