Systematic Equity Investing at Allianz Global Investors
Systematic Equity investing aims to deliver superior equity market returns through a repeatable, risk-managed approach, providing added value to our clients. As the Systematic Equity team at Allianz Global Investors, founded in 1996, we have been pioneering this field for more than 25 years and developed it continuously. Our innovations include integrating sustainability into the investment process, and we have been employing Artificial Intelligence in our methodologies for more than a decade. And we have a strong team with the experience and know-how to continue this journey.
Since inception, our flagship strategy, Best Styles Global Equity, has demonstrated the potential to generate long-term excess returns in various market scenarios and throughout the business cycle. Our broad range of regional, sustainable, and specialist strategies build on this success and have shown strength of their own.
Best Styles Global was launched in 1999. Its track record demonstrates the power of compounding stable outperformance and minimizing relative performance drawdowns.
Investment philosophy
The Best Styles investment philosophy is based on the conviction that investment styles – factors like value or momentum – carry risk premia that can be harvested in a disciplined, systematic way, largely independent of the economic or market environment.
In our view, these risk premia are integral to the success of active equity portfolio management and, as such, should be a central element of the investment process. But we also believe that these risk premia carry other risks that need to be carefully managed. By strategically harvesting risk premia from well-recognized investment styles in a risk-controlled manner, we aim to consistently achieve outperformance while limiting the volatility of excess returns.
Our views also align with decades of academic financial markets research. Verified and complemented by our own in-house research, this been instrumental for the enduring success of our strategies across various market cycles and major investment regions worldwide.
Investment process
The Best Styles investment process fully reflects our Best Styles investment philosophy. We strive to build a portfolio with exposure to long-term investment style winners while combining that with rigorous risk management.
The risk-controlled portfolio construction process combines stocks to achieve an overall attractive investment style profile, while at the same time respecting multiple constraints, concerning, e.g., active sector, region, single stock weightings or the market beta. Further constraints apply to investment style overlaps as well as non-rewarding risk factors to ensure an efficient collection of risk premia, focusing on exposures where we see the potential for added value.
Owing to our team's robust academic background, we've explored and applied a wide spectrum of quantitative techniques, many now classified under the domain of AI. For more than a decade, we have been actively employing AI techniques, making them a crucial component of our investment process. Using the knowledge and experience of the team to leverage advanced technology has been the key to our success.
Best Styles applies a truly balanced and diversified multi-factor approach. The investment style “Value” plays a prominent role, but it is well-complemented by “Quality” and a broader definition of trend-following styles such as “Momentum”, “Revisions”, and “Growth”. Combined with AI techniques, this approach is the foundation of a compelling proposition, illustrating how ongoing research can secure a competitive edge in the asset management industry.
About the Systematic Equity Team
The Systematic Equity team consists of 18 investment professionals and is organized in the Portfolio Management, Research, and Sustainable Investing groups. With its considerable number of PhDs, the team has strong academic credentials, while diversity of thought has always been key to our success. As such, the team comprises members with backgrounds in finance and economics as well as engineering, mathematics, and physics. Many have long-standing industry experience and have been with the team for a long time – over eight years on average, but several have been with the team for a decade or two.
The team is led by Dr. Michael Heldmann, CIO Systematic Equity:
Dr. Michael Heldmann, CFA
Dr. Michael Heldmann is the CIO of the Systematic Equity team. Prior to being named CIO of the overall Systematic Equity platform, he was CIO Systematic Equity US and based in San Francisco. Previously, he also managed Best Styles Emerging Markets and Best Styles Europe Equity products. Before joining the Systematic Equity team, he worked for the international laboratory CERN, Geneva, Switzerland as a researcher in the field of particle physics.
He obtained a master’s degree in Physics from the University of Mainz, Germany and a PhD from the University of Freiburg, Germany. He is a CFA charterholder.
Research
Academic research has been the foundation of factor investing. The understanding that there is more to returns of investment portfolios than “skill”, and the understanding that there is structure to equity market returns, has improved the ability of investors and asset owners alike to make good investment decisions.
Since the origins of the Best Styles strategy in 1999, the Systematic Equity team has remained at the forefront of quantitative investing, conducting their own research and enhancing their investment process.
While the targeted investment styles have broadly remained the same, much has changed under the hood. And while the team has enjoyed much success, they have also navigated market turmoil and overcome challenging periods – by constantly innovating, but also by sticking to their conviction in the foundations of the approach.
Sustainability
As part of a global asset manager with ambitious sustainability goals and to appropriately service the demand of our clients for sustainable investment solutions , the Systematic Equity team has built their Sustainable and Responsible Investing (SRI) credentials by including SRI elements in client portfolios since 2014 and developing products that meet regulatory requirements such as Article 8 funds.
Three core elements underpinning our standard SRI methodology:
With the creation of the Best Styles SRI strategies in 2019, the Systematic Equity team has launched a comprehensive solution for SRI investing:
SRI elements can be added to traditionally managed Systematic Equity portfolios to meet client needs, including Best-in-Class approaches and customized exclusions.
Our Systematic Equity strategies
Glossary of Investment Styles
| Value | "Cheap" stocks with attractive valuations, often "out of favour" or "contrarian". Inputs: Price/Earnings, Price/Book, Dividend Yield, ... |
| Momentum | Stocks with strong recent performance, with a positive trend or "in favour". Inputs: Deep Learning Momentum, Price Momentum, Relative Strength, ... |
| Revisions | Stocks of companies whose earnings have been positively revised by sell-side analysts. Inputs: Earnings Call Transcripts, Earnings Revisions, Earnings Surprise, ... |
| Growth | Stocks with positive growth, especially a history of delivered, i.e., stable growth. Inputs: Earnings Growth, Dividend Growth, ... |
| Quality | Financially strong stocks with high profitability, high balance sheet quality, etc. |
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Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested. Investing in fixed income instruments may expose investors to various risks, including but not limited to creditworthiness, interest rate, liquidity and restricted flexibility risks. Changes to the economic environment and market conditions may affect these risks, resulting in an adverse effect to the value of the investment. During periods of rising nominal interest rates, the values of fixed income instruments (including positions with respect to short-term fixed income instruments) are generally expected to decline. Conversely, during periods of declining interest rates, the values of these instruments are generally expected to rise. Liquidity risk may possibly delay or prevent account withdrawals or redemptions. The volatility of fund unit/share prices may be increased or even strongly increased. Past performance does not predict future returns. If the currency in which the past performance is displayed differs from the currency of the country in which the investor resides, then the investor should be aware that due to the exchange rate fluctuations the performance shown may be higher or lower if converted into the investor’s local currency. This is for information only and not to be construed as a solicitation or an invitation to make an offer, to conclude a contract, or to buy or sell any securities. The products or securities described herein may not be available for sale in all jurisdictions or to certain categories of investors. This is for distribution only as permitted by applicable law and in particular not available to residents and/ or nationals of the USA. The investment opportunities described herein do not take into account the specific investment objectives, financial situation, knowledge, experience or specific needs of any particular person and are not guaranteed. The Management Company may decide to terminate the arrangements made for the marketing of its collective investment undertakings in accordance with applicable de-notification regulation. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable at the time of publication. The conditions of any underlying offer or contract that may have been, or will be, made or concluded, shall prevail. The duplication, publication, or transmission of the contents, irrespective of the form, is not permitted; except for the case of explicit permission by Allianz Global Investors GmbH.
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