IFM Investors - Australian Equities Extended Alpha Strategy

Respected, sizeable
and experienced
investment team

Core skills in
quantitative,
fundamental investing

Strong track record of delivering high-quality alpha

We believe that alpha can be sourced from repeatable and predictable behavioural biases, specifically momentum and value investing. IFM Investors recognise that purely quantitative-driven strategies that rely on systematic factor screens are insufficient and may falter over time, so our fundamental overlay seeks to mitigate certain risk factors (i.e. value traps, crowded trades) that purely quantitative driven strategies tend to ignore. The team has a formal commitment to fundamental research and continued improvement to investment processes. This hybrid approach allows us to capture the returns from value and momentum signals but we also take into account the risks such as ‘crowded trades’ and ‘value traps’ that traditional quant investors tend to overlook.

Investment philosophy

The investment philosophy for this strategy is that listed equity markets, particularly larger capitalised stocks, are relatively efficient and that the best approach to adding consistent value is to combine a systematic (or quantitative) approach with a fundamental overlay. We believe this approach – a ‘Smart Quant’ philosophy, combined with the use of shorting – provides the best method for capturing a significantly higher exposure to our alpha factors as it combines the breadth and consistency of quantitative investment with the skills and judgement of a fundamental approach. A diversified basket of short positions improves portfolio alignment, as well as reducing stock specific risk, and allows the portfolio to also profit from falling stock prices.

What sets us apart?

Experienced team

The founding team members, Lachlan Davis and Mark McClatchey, have worked together for more than 17 years and have built an experienced, stable team, with an average tenure of 10 years.

Our unique blend of market experience and research capability enables us to create solutions based on the knowledge of experienced practitioners as well as the latest research.

Track record

The Active Equities team has a long history of generating high-quality alpha with controlled risk, outperforming investment objectives. The team has more than 20 years' experience in quantitative and fundamental investment management in Australia and more than 10 years' experience in Asia.

Fundamental overlay

Our proprietary fundamental overlay helps mitigate the pitfalls of relying solely upon a quantitative approach. The ‘Expectations at Risk’ ([email protected]) overlay identifies the key drivers of a stock’s future earnings and assesses likely earnings outcomes for each stock.

Staff alignment

A key differentiator for IFM Investors is the philosophical alignment of our firm with the interests of its investors. Our fiduciary duties are instilled in our employees and are reflected in our stewardship of client assets. Our priority to maximise net returns closely aligns us with the objectives of our owners, many who are also our clients and invest with us on behalf of their members.

Cost efficiency

We aim to ensure that fees are fairly priced across our global product range. We seek investments that make sense on a risk-return basis for like-minded, well-capitalised institutional investors.

Distinctive fundamental overlay is a key risk management tool

A crucial component of the investment process is the team’s fundamentally based ‘Expectations at Risk’ ([email protected]) overlay. This integral step is designed to mitigate risks that traditional quantitative strategies tend to ignore. The common pitfalls of quantitative investing include being caught by ‘value traps’ and in ‘crowded’ momentum trades. [email protected] identifies the key drivers of a stock’s future earnings and assesses likely earnings outcomes for each stock. This helps us quantify the likely upside/downside risk in a stock’s potential earnings, as well as the level of dispersion in possible earnings outcomes.

Experienced investment team

The Active Equities team is a respected and experienced team of investment professionals based in Sydney and Hong Kong. The team is led by Lachlan Davis, Head of Large Cap Active Equities, with Mark McClatchey as Head of Research.

The team has more than 20 years' experience in quantitative and fundamental investment management in Australia and more than 10 years' experience in Asia. It has managed equity portfolios across the risk spectrum, from enhanced index to long/short and hedge fund strategies and is highly experienced in managing large amounts of AUM.

The team applies its core skills in both quantitative and fundamental investing across a range of strategies using the same underlying investment process and model.