Acadian's investment process is grounded in fundamental beliefs but is objective and disciplined in execution. Drawing on a robust database of detailed information on over 40,500 companies, we seek to systematically exploit mispricings across the global universe of investment opportunities. Our investment process generates a market-relative return forecast for every stock three times a day. Using advanced portfolio construction tools, these return forecasts are combined with other key inputs to build client portfolios. Trades are generated so as to maximize implementation efficiency and minimize cost.
We believe that the larger the universe of potential investments, the greater the potential opportunity an active manager has to add value. Acadian follows more than 40,500 stocks globally in over 100 countries, across all industries and within all capitalization ranges. This coverage may allow us to uncover opportunities often overlooked by others.
We employ a multi-dimensional process of converting wide-ranging investment insights into return forecasts. This process includes both bottom-up and top-down views on stocks and markets which we combine to form world-relative views on all companies globally. To account for changing market environments, we dynamically weight our factors based on persistence of payoffs, market conditions and expectations for subsequent returns. Acadian's ongoing research has resulted in important refinements to traditional fundamental factors over time, added new behavioral and technical elements to our forecasts, and ultimately enabled Acadian to consider multiple aspects of security mispricing in our stock forecasts.
Acadian's process synthesizes return forecasts with risk forecasts, transaction cost estimates and portfolio constraints. Each of these elements is incorporated in an effort to insure that we gain access to the full potential of our return framework while adapting to changes in risks, costs and liquidity that maximize the risk-adjusted returns of the portfolio.
The discipline and consistency of our process extends to transacting efficiently in the markets where Acadian invests on behalf of clients. We employ a systematic trading process that utilizes a network of more than 26 counterparties to allocate trades according to execution skill within a given market segment. The objective of this process is to reduce market impact, achieve high rates of execution and minimize costs.
Oversight of the process by Acadian’s portfolio management team is another key aspect of our process. This includes reviewing portfolio parameters at point of implementation, approving trade lists as part of portfolio rebalances, overseeing portfolio positions, analyzing risk exposures, and investigating factors driving performance.
Risk targets, as well as other investment guidelines, are incorporated into the portfolio optimization process and our compliance systems before a portfolio’s initial funding and are then automatically referenced and applied each time the portfolio is rebalanced. The portfolio construction process uses systematic optimization tools to control overall portfolio risk, as well as individual risk factors, in an effort to create portfolios with the optimal trade-off between risk and expected return. For each rebalance, members of the investment team provide significant oversight in reviewing the output of the models for data accuracy and mandate compliance.