Scientific Beta

The paper details three case studies to highlight how investors can use completion strategies to correct biases, either to re-align their portfolio with its long-term strategic objectives, or to implement short-term tactical views to address unexpected change in market conditions.

Market movements and changing investment conditions can pose challenges for institutional investors, gradually shifting even carefully constructed portfolios away from their strategic objectives.

This risk has been particularly highlighted in recent years, a period when US growth stocks have significantly driven the performance of market cap benchmarks, resulting in many active and passive equity portfolios to develop significant unintended growth tilts.

In other instances of inadvertent shifts, regional imbalances can arise in multi-manager global equity portfolios as by-products of manager specialisation. Challenges also can arise in integrating and achieving sustainability objectives.

Completion portfolios can be used to correct these misalignments that can develop between investors’ desired positioning and actual portfolio exposures.

The paper details three case studies to highlight how investors can use completion strategies to correct biases, either to re-align their portfolio with its long-term strategic objectives, or to implement short-term tactical views to address unexpected change in market conditions.

Through the different case studies, we show that completion strategies provide a targeted, flexible mechanism for fine-tuning portfolio characteristics and offer a powerful tool for maintaining strategic intent and improving overall portfolio performance. Hence, they represent a solution to the persistent challenge of portfolio management: ensuring that investment allocations consistently reflect an investor's core objective.