Active European

The firm's active European equity strategy enables investors to add incremental return above country specific or Pan-European benchmarks at a risk budget consistent with the client's risk tolerance. For all cap, large cap, and small cap pan-European benchmarks, target information ratios are.6 with risk budgets ranging from 4% to 6%. For single country portfolios, target information ratios are .5 with risk budgets ranging from 2% to 4%. The investment universe includes every stock in the MSCI and FTSE European stock indexes and thus strategies may be customized to the unique goals and constraints of each investor.

There are several unique aspects to L.A. Capital's active equity European strategy.  First, the Dynamic Alpha Model dynamically prices 20 country, 25 fundamental, and 15 sector factors to identify the best return opportunities in the current market environment.  The model breaks away from past relationships by pricing each factor based on current conditions without regard to its long-term historic performance. Historically, one-third of the Large Cap Dynamic model's alpha has come from risk controlled sector bets providing a valuable source of incremental alpha.  Finally, rigorous risk controls are imposed where security bets are limited to +/- 2% relative to benchmark weights while country and sector bets are generally limited to +/- 3% of benchmark weights.

Both the portfolio construction and implementation process are managed dynamically to maintain portfolio efficiency.  The portfolio's risk budget expands slightly when return opportunities improve but contracts as the market conditions become more volatile and the pricing of risk factors becomes less clear.  Implementation costs are aggressively managed through a dynamic trading process as market orders are placed continuously throughout the month to capture the mean reverting short-term price patterns of equities and to minimize market impact costs.