eVestment [EDMA] Enhanced Dynamic® Moderate Active Strategy Investment Performance Report
Applications of Enhanced Dynamic® Moderate Active Strategy
Enhanced Dynamic®
Moderate Active [EDMA] Strategy:
While the Enhanced Dynamic® may be impressive when applied to index products, we have been able to provide even greater risk adjusted results, net of all fees and expenses, with style adherent active equity portfolios, as displayed in the Enhanced Dynamic® Moderate Active [EDMA] empirical studies below. Which are further confirmed through independent analysis, and as displayed within the [non-GIPS compliant] 10-year audited results of an institutional retirement plan consulting client, which are available at the www.enhancedinvesting.com site.
The flexibility of the Enhanced Dynamic® overlay methodology allows for the implementation of the strategy with a broad array of independent style adherent investment managers, and does not require considerable change (if any) in a domestic equity or retirement plan’s existing style adherent investment manager line-up.
Additional observations and details:
We expect the in-favor style adherent active managers to provide higher returns (compared to the broad market averages) when their underlying style is in favor and over-weighted (Alpha) versus their stated portfolio broad market benchmarks (broad market indices and style/cap size benchmarks).
We further recognize these same active equity managers will under-perform the same benchmarks when their style is out of favor (and they are under-weighted within the portfolio).
- Using a proprietary manager evaluation process, we evaluate and select the independent active investment managers that possess proven, performance characteristics that equal or exceed their appropriate style benchmarks when their style is in favor, and that best complement our strategic Enhanced Dynamic® overlay weighting methodology.
- By the design of the Enhanced Dynamic® quantitative models, the most often that a change (reallocation) is made is once in a 12-month period.
- For the purpose of this empirical study, inclusion of the active domestic equity managers used within the Enhanced Dynamic Moderate Active [EDMA] studies was determined by their reporting within the eVestment Alliance investment manager data base, their declared investment style within the data base, and other proprietary evaluation factors which will be considered in the selection process, such as:
- Style adherence,
- Investment results per the Enhanced Dynamic style and cap size analysis
- Independent reviews and screening services,
- Available due diligence reports,
- Participation in institutional programs and platforms
- Additional traditional evaluation measures such as investment consistency, employee turnover, and firm stability.
- Investment managers that are selected to participate in the EDMA portfolios are expected to maintain style adherence discipline throughout all investment cycles.
- Significant and ongoing deviation from the stated discipline will be cause for examination and review and possible termination, due to concerns of the inadvertent shifting of the risk/return dynamics of the entire EDMA portfolio.
- Active managers are permitted to manage cash allocations as they believe best reflects available investment opportunities within their discipline, and are not required to maintain a fully invested stance throughout all market cycles.
- We will not “micro-manage” the investment managers, preferring to allow them the needed flexibility of continuing to display their historic investment strategies and success.
- The most common cause for removal of an investment manager has been the result of style deviation from their stated process, not investment under-performance.
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DISCLOSURE
Copyright (c) Enhanced Investment Partners LLC. 2021. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein…