Active U.S.

The firm's active U.S. equity strategy enables investors to add incremental return above any core or style based benchmark in the U.S. equity market at a risk budget consistent with the client's risk tolerance. For large cap benchmarks, the target information ratio is 0.5 with risk budgets ranging from 2% to 4%. For all cap and small cap benchmarks, target information ratios are 0.6 with risk budgets ranging from 3% to 6%. Our investment universe includes every stock in the Russell 3000 and thus applications may be customized to the unique goals and constraints of each investor.

There are several unique aspects to L.A. Capital's active equity strategy. First, Los Angeles Capital Management's Dynamic Alpha Model dynamically prices 30 fundamental and 15 sector factors, which enables the strategy to identify the best return opportunities in the current market environment.  The model breaks away from past conventions where managers weight factors based on their historic efficacy and instead determines the current risk premium associated with each factor based on current conditions. Historically, one-third of the Large Cap Dynamic Alpha Model's alpha has come from risk controlled sector tilts providing a valuable source of incremental alpha. Finally, we impose rigorous risk controls where security bets are limited to +/- 2% relative to benchmark weights while sector bets are 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.