How it works

Aperio’s Thematic Beta strategy has no predefined investment thesis nor do we recommend one when asked. Rather, we begin by consulting with our clients on a desired strategy or investment exposure. Often the strategy is based on a third-party manager identified by the client. Example strategies Aperio has implemented include:

  • Global Quality – Invest only in global companies that have low leverage, high earnings yield, low volatility, and low earnings variation.
  • Domestic Large Cap High Yield – Build a portfolio to track the S&P 500 but overweight higher dividend stocks so the portfolio achieves 1.5x the benchmark dividend yield.
  • Global with an Emerging Markets Overweight – Create a portfolio based on MSCI All Country World Index with an overweight in emerging market countries

We then map the strategy onto a multi-factor risk model, expressing the strategy as a set of risk factor targets comprised of geographies, sectors, and styles (which include size, value, volatility, leverage, momentum, and liquidity, among other factors). Each factor may be overweighted, underweighted, or excluded from the portfolio entirely.

Aperio uses the risk factor targets and quantitative tools to assemble a set of stocks that reflect the investment strategy. Taxable clients may choose to add Aperio’s active tax management to improve after-tax returns. Additionally, values-based investors may choose to overlay custom social screens. The portfolio is rebalanced continually to ensure that the stocks remain representative of the desired exposure.

GEM2 Model

Aperio uses the MSCI Barra GEM2 equity model, the same risk factor model used by numerous institutional investors to construct portfolios with targeted risk factor exposures.

Library