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Systematic Equity — Active: Alpha Innovation and Advanced Technology

At State Street Global Advisors, our systematic equity – active team aims to generate alpha by carrying out cutting-edge research—an approach that has long been at the core of our investment prcesses. Our research is powered by investment expertise and state-of-the-art quantitative technology, including a new re-optimized cloud-based platform for data storage and analysis.

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Take a Closer Look at Our Research Process

Historically, our rigorous research has spawned incremental improvements to our alpha scores and expected long-term predictability that accumulates over time.

Innovation Backed by Research

We can point to several themes in our research culture: a robust and disciplined research approach, diversity of ideas (insights from multiple disciplines), and alignment of incentives with client outcomes.

Research-driven innovation continues to allow us to source creative stock selection ideas that can boost returns and increase non-traditional factor exposure. Over the past seven years, we have developed long-term research priorities and put ideas into place that have helped to provide differentiated outcomes.

The Importance of Innovation

We offer benchmark aware and unaware strategies to maximize alpha through active stock selection, via a multi-dimensional model. Our investments have exposure to Value, Quality, Sentiment and Catalyst core themes. Our efforts to innovate are driven by a wide range of trends. These can be summarized as follows:

  • The landscape for active management has become even more competitive and in many cases commoditized. Investors have widely adopted certain factors, making non-traditional factor innovation key to performance.
  • Alpha arises from discovery and the ability generate and take advantage of orthogonal factors.
  • Research budgets should be optimized towards long-term alpha research priorities.

Market participants have placed an increasing focus on technologies aimed at reducing the time required for factor discovery. However, we continue to exercise caution against abandoning rigor. Increasing computational power still requires in-depth testing and a keen understanding of the drivers of expected returns.

A Closer Look at Our Research Process

We believe that our process helps to put our research vision — including alpha generation and differentiated outcomes — into action. Our process has the following elements:

Creative Ideas

To set our research priorities, we start by allowing employees across the firm to provide research ideas to the systematic equity — active team during our research summit. This unique approach allows us to capitalize on the diverse views and perspectives across a global multidisciplinary team. It also allows for studies of feasibility, deep research and debate, and finally allows for the leadership team to adjudicate as it relates to the voting so as to determine research priorities for the following 12–18 months. 

The ideas satisfy the following requirements:

  • New Signals Ideas are focused on (1) new, robust signals that have economic intuition; (2) existing signals that can be improved; and (3) portfolio construction tools enhanced by the firm’s technological resources that efficiently transfer alpha.
  • Longevity We are not interested in factors that are fleeting or only work for a short period of time.
  • Data integrity One must avoid data mining to avoid accidental discoveries of non-prespecified outcomes.
  • High Standards There is a prioritization on the quality of ideas over the volume of ideas, and we seek rigor in how ideas are selected.
  • Collaboration Weekly global team research meetings invite challenges.

The One Alpha Model

We operate with a single alpha model that can be deployed with varying risk budgets and across different geographies. The model is based on having one forecast for every stock, rather than having signals that are applied to all stocks indiscriminately; importantly, selection and influence can vary across segments. 

Advanced Quantitative Tools

Our toolkit includes a new cloud-based computing platform; an ongoing system of alpha diagnostics and research; and a range of portfolio construction tools. Also, we have partnered with risk-model engine provider Axioma.

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