With our strong equity expertise, from event-driven to long-term phenomenons, and our big data and IT skills, we design and implement a market-neutral, adaptive factor-based, and worldwide equity support: ERAAM Long Short Equity ©

Philosophy

Our views on factor investing

A simple idea

  • Some factors explain abnormal return
  • Many well-documented factors in the academic world, invested on for decades

In real life, many challenges on the way

  • Overfitting, execution costs, correlations
  • Differences in design, assembling and implementation lead to very different results

Our values

  • Scientific rigour and transparency
  • Cutting-edge and systematic implementation

True scientific approach and state-of-the-art engineering are key to achieve outperformance

Portfolio

Stocks universe

  • North America + Europe + Asia Pacific (ex-China) (developed markets)
  • Filter: Market Cap > 100 M€, Liquidity > 10 M€ daily
  • Blacklist: based on Ottawa and Oslo conventions

Stocks universe

Our investable universe covers 90% of the world’s market cap (ex-China)

Portfolio concentration

Portfolio concentration

Highly diversified portfolio, idiosyncratic risk reduced to its minimum

Country and sector exposures

  • Global gross exposure < 160%
  • Country net exposure < 5%, sector net exposure < 15%

Country and sector exposures

Ex-post portfolio factors exposure as of 07/2018

Ex-post portfolio factors exposure

ERAAM Long/Short Equity: pure factor investing

Investment process

Process overview

Process overview

Portfolio construction: stock selection

Bottom-up portfolio construction

  • Returns forecasting with our MLRC model
  • One final forecast per stock
  • Execution costs embedded in the forecast

Portfolio construction, stocks selection

One signal per stock, embedding all factors predictive powers and costs

Portfolio construction: factor weighting

Defining the weight of each factor, MLRC proprietary model

  • Measuring of each factor’s predictive power
  • Factor-relative weighting, dealing with correlations: multilinear regression
  • Rolling methodology: adaptive to factor trends / cycles

Portfolio construction, factor weighting

Portfolio construction: risk management

  • Universe ranked by forecasted 3-month return
  • Long / Short portfolio per region: long the first decile, short last the one
  • Beta hedge: hedge portfolio to offset market exposure

Portfolio construction, risk management

Our competitive edge

Our competitive edge