This “volatility capture“ process reweights cap-weighted indexes to what we believe are more efficient combinations – that have the potential to generate a return greater than the market with less relative risk, or market-like returns with significantly less risk than a cap-weighted index.
As stock prices move up and down in the market, INTECH rebalances its portfolios back to their target weights, selling shares as prices move higher and buying shares as prices move lower. Over time, the expected outperformance of INTECH portfolios results from this ’buy low/sell high’ methodology, which allows a trading profit to be realized as the portfolios are rebalanced back to target weights.
The rebalancing effect:
- Provides the opportunity to produce a positive return from a portfolio of stocks even during periods when individual stocks realize no return.
- Results in thousands of opportunities to capture this source of alpha over time.
We are confident that the specific risk controls embedded in our process will help to protect the portfolios on the downside through many different market cycles.
While we seek incremental returns – typically 1% to 3% above the benchmark index, gross of fees – compounding has the potential to create a meaningful impact on the growth of an investment over the long term.
INTECH offers a consistent and repeatable risk-managed investment process, which, over the long run, has been able to generate alpha, has worked in varying market conditions and adapts to changes over time.