The Global Balancing Act provides sector and region allocation recommendations with the goal of enhancing the dollar returns of unhedged global equity portfolios.
Our model is built on a scoring mechanism. Each month it compares the markets under coverage on the basis of quantitative investment factors that have been shown to convey information about future equity returns in research by academics and practitioners, including ourselves. These include indicators of Valuation, Growth, Risk, Sentiment/Momentum, and Oil and Metal Prices Momentum.
Each month, scores are computed for each factor, and a total score is computed for each region / sector (equal to the weighted average of the individual factor scores). Each region / sector then gets an over weight or underweight allocation relative to the benchmark that is roughly in proportion to the difference between the total score and the cross-market average total score (with restrictions on the maximum allocation possible to each market to avoid unrealistically large exposures to small markets). The model is updated each month and the performance of the model portfolio is compared to the benchmark.
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