Active is:<br/>Harvesting risk premiums through a systematic approach

Allianz Best Styles Global Equity Strategy

Best Styles is our multi-factor equity strategy that harvests equity risk premia to provide superior risk adjusted returns to our clients. While factor investing is not a new phenomenon, and is well documented in academic research for over thirty years, it is only recently that this type of strategy has caught the attention of institutional investors as they search even harder for true alpha generating strategies.

Philosophy

Our strategy aims to capture the risk premia associated with five successful long-term styles: Value, Momentum, Earnings Change, Growth and Quality.
We believe that these factors carry risk premia that can be harvested in a disciplined systematic approach, largely independent from the economic or the market environment and that a diversified factor mix allows us to harvest these risk premia without having to take the significant volatility of individual investment styles. Over time, each of these five factors have been a proven driver of long-term equity performance. In Best Styles we determine the preferred investment style mix based on those five investment styles. While individual investment styles like Value or Momentum have outperformed the broad market in the longer run, they have nonetheless suffered protracted interim periods of underperformance. We recognise that different investment styles perform well in different market environments and at different points in the economic cycle and so we seek to diversify the mix of investment styles within the portfolio to smooth the cyclicality of individual investment style returns. The Best Styles strategy aims to consistently outperform the benchmark whilst maintaining a similar level of risk as the benchmark.

The investment process for Allianz Global Investors’ Best Styles Equity strategies has remained broadly unchanged since its inception in 1999. However, the Systematic Equity team undertakes ongoing research to fine tune and enhance the definition and representation of investment styles, and the risk management measures applied. This ensures the process continues to be able to deliver stable, reliable outperformance in every market environment and through the entire business cycle.

Process

The Best Styles process uses systematic top-down and fundamental bottom-up analysis as well as rigorous risk management. The integrity of our portfolio management and risk management process results in a well-diversified mix of the five factors; Value, Momentum, Earnings Change, Growth, Quality, and also ensures that factor overlap remains small. To establish true diversification and avoid drawdowns in relative performance, Best Styles manages factor risks on an individual stock level. By doing so Best Styles seeks to implement exposures to risk factors that are rewarded in the long run, while it positions itself neutral to non-rewarding risk factors such as FX movement or the oil price. Simply blending a number of factor indices is inefficient as this approach does not address either the shorter term volatility of factors nor does it take care of non-rewarding risks.

Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested. Past performance is not a reliable indicator of future results. If the currency in which the past performance is displayed differs from the currency of the country in which the investor resides, then the investor should be aware that due to the exchange rate fluctuations the performance shown may be higher or lower if converted into the investor’s local currency. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or wilful misconduct. The conditions of any underlying offer or contract that may have been, or will be, made or concluded, shall prevail. This is a marketing communication issued by Allianz Global Investors GmbH, www.allianzgi.com, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42-44, 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (www.bafin.de). Allianz Global Investors GmbH has established a branch in the United Kingdom, Allianz Global Investors GmbH, UK branch, 199 Bishopsgate, London, EC2M 3TY, www.allianzglobalinvestors.co.uk, which is subject to limited regulation by the Financial Conduct Authority (www.fca.org.uk). Details about the extent of our regulation by the Financial Conduct Authority are available from us on request. The duplication, publication, or transmission of the contents, irrespective of the form, is not permitted.