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The benefits of investing in lower-risk equities are sometimes overlooked. That’s why Acadian’s managed volatility equity strategies are designed to take advantage of a well-recognised but under-exploited market opportunity – the low volatility anomaly.

A Broader Perspective On Risk

  • Andrew Hair, Chief Executive Office


    The benefits of investing in low-risk equities are sometimes overlooked.


    Whilst conventional wisdom tells us that high-risk assets outperform their low-risk counterparts, in practice this isn’t always the case. We call this the low-volatility anomaly – which is the systematic mispricing of low-risk equities by financial markets – and it’s this anomaly that we seek to exploit when building Managed Volatility equity portfolios. Why take risk if it might not be rewarded? You could say our approach is to view the risk and return relationship through a different lens.


    With the launch of our flagship Managed Volatility strategy in 2006, we were among the first firms to advance the theoretical idea of low-volatility equity strategies into a practical reality for our investors. Today, we manage over A$23 billion in these portfolios globally. These strategies are designed to provide market-like returns at significantly lower levels of market risk. Our pioneering research and lengthy track record suggest that this objective of reducing risk without giving up on return is achievable.


    With a foundation built on over 30 years of experience in quantitative, risk-focused equity investing, Acadian’s broad and deeply experienced team of 90 investment professionals apply fundamental insights in a systematic manner to build equity portfolios that aim to hold an optimal combination of low-risk stocks with low levels of dependence on one another. By weighting a portfolio towards lower risk stocks, we believe this can substantially reduce the severity of future drawdowns from falling asset values. The benefits of a low-volatility approach increase when viewed from the perspective of compounded returns, which improve at lower levels of risk compared to the cap-weighted index.


    By accessing the growth potential of equities and coupling this with an additional focus on the benefits of low-risk investments, Acadian takes a wide ranging perspective on risk. This offers investors the ability to allocate capital towards the traditionally higher returns of the equity asset class, whilst recognising their preference for reduced risk.


    Perhaps it’s time for you to see low risk from a broader perspective.

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