Atlas Risk is the flagship global equity strategy utilized since the inception of the firm. The objective of Atlas Risk is to outperform the global equity index through a favorable selection of countries, sectors, and individual stocks using a systematic quantitative multi-factor model.
Atlas Capital Advisors LLC (the Manager) uses a proprietary framework to evaluate expected returns, market sentiment, and risk for the single country and U.S. sector indices which together comprise the global equity market. This framework results in decisions regarding which regions, countries, and sectors to overweight or underweight relative to the weights in the capitalization-weighted global equity index.
There is an additional assessment of the individual securities within each country or sector for clients who select this option. Stocks are ranked using a similar multi-factor model, with the higher-ranked stocks receiving an additional weight in the implementation.
The Manager may also invest in ETFs of other higher return asset classes such as preferred stock and MLP’s, as an alternative to equity ETFs. Other asset classes are included when the Manager believes they improve the expected return relative to risk of the strategy.
The Strategy uses a consistent, systematic approach with a foundation in academic and Manager proprietary research. The benchmark for the Strategy is the FTSE Global All Cap-Net Tax (U.S. Regulated Investment Company) Index.
Research
The Manager utilizes academic and investment practitioner research regarding equity factors (Fama, French, Carhart, and others) as well as ongoing in-house research. The Manager also uses proprietary research regarding the influence of global economic data on equity market outcomes. The Manager has been running enhanced equity index strategies since 2003.
Approach
(1) Invest Globally:
- Diversification across geographic markets provides the opportunity to benefit when there are attractive markets outside the home country.
(2) Create alpha from beta management:
- Return of any equity market index (the equity beta) can be achieved dynamically and cheaply via ETFs.
- Additional return (alpha) can be generated from systematic beta management – informed choices about which stock markets to own and avoid. Generating alpha from beta management is often under-appreciated and under-utilized by investors.
(3) Take risk where it is more likely to be rewarded:
- Examine valuation, momentum, growth, risk, and currency for each market. Allocate the risk budget primarily to favorable markets.
Allocation discipline
(1) Index assessment: Evaluate fifty-one segments of the global stock market (thirty-seven country indices, eleven U.S. sector indices, international small-cap, U.S. small and mid-cap). Evaluation based on valuation, momentum, growth, risk, and currency.
(2) Portfolio Weighting: Within the equity allocation of the Strategy, the weight to countries and sectors are set relative to the market capitalization weight of the benchmark, with more favorable indices given more weight than the benchmark and the less favorable with weights below the benchmark.
Rebalancing
Portfolios are rebalanced quarterly, using the process described above.
