PROCESS OVERVIEW

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.

INFLUENCERS ON THE PERFORMANCE OF INTECH'S STRATEGIES

Market Diversity

Market diversity, or size, is a measure of how capital is distributed among stocks in a market or index. When diversity is rising, capital is more evenly distributed among the stocks in the market; when diversity is declining, capital is more concentrated into a smaller number of stocks.

INTECH's strategies tend to overweight smaller stocks in a large-cap universe and underweight larger stocks. Rising diversity, or a greater distribution of capital among stocks, tends to be more favorable for INTECH's portfolios.

For more information on diversity, please read the research paper written by Dr. Fernholz, "Stock Market Diversity" [January 2005]. The paper reviews the measurement of Diversity, the behavior of diversity over time and the effect of diversity on portfolio performance.

Relative Volatility

Relative volatility, or how stocks move in relation to one another or relative to a benchmark, also influences INTECH's relative performance. A more stable relative volatility environment is conducive to INTECH's investment process.

SEE ALSO

RELATED CONTENT

Investment Philosophy
The foundation of INTECH's investment process remains the same today as when the firm was founded in 1987.