Economic theory is based around the idea of the rational actor – but ample evidence shows that investors are susceptible to doubling down after a loss, or herding towards the overpriced, trendy security of the day. Toby Warburton explores the predictable unpredictability of investors, and how the Active Quantitative Equity team aims to exploit the market inefficiencies that result.
Over the past six months, market sentiment around the world has shifted to favor lower-risk stocks, providing further evidence that defensive equities may continue to outperform in the short run.
How can pension plans achieve consistent returns amid weakening return prospects and increasing equity-market volatility, if equities must remain a key driver of those returns? One potential answer involves increasing the allocation to equities, while simultaneously taking an actively managed defensive position within that equity allocation.