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Dual Engines: Combining Fundamental and Quantitative Equity Approaches in Portfolios

THIS FINANCIAL PROMOTION IS PROVIDED BY GOLDMAN SACHS ASSET MANAGEMENT B.V.

P E RS P EC T IV E S D UAL ENG INES: COM B I NI NG FUNDAM ENTAL AND QUANTI TATI VE EQUI T Y AP P ROACHES I N PORT FOL I OS

Hania Schmidt Carolyn Tavares Luke Barrs Head of Quantitative Investment Head of Portfolio Chief Business and Strategies (QIS) in EMEA and Construction and Client Officer for Global Co-Head of Client Portfolio Manager Research for Fundamental Equity Management for QIS Multi-Asset Solutions

1Different Dimensions 2Complementary Across 3Elevated Information Ratios of Alpha Generation Market Regimes and Style Flexibility Fundamental and quantitative equity In our view, the two approaches excel Combining fundamental and quantitative strategies operate differently. Fundamental in opposing market environments— approaches also has the potential investing relies on deep, human-led quantitative during macro- or policy- to improve a portfolio’s information research to build concentrated, high- driven rotations, and fundamental ratio, making active risk work harder conviction portfolios focused on during idiosyncratic, stock-specific stress to compound alpha. Furthermore, long-term idiosyncratic opportunities. events. Because they generate alpha broader style choice across the Quantitative investing leverages systematic, from independent and often opposing fundamental manager universe offers large-scale data analysis to construct sources, they may maintain structurally the implementation breadth needed to highly diversified, benchmark-aware low-to-negative correlations, providing calibrate growth and value exposures portfolios that prioritize numerous small a potential diversification benefit that across changing market cycles. bets over concentrated positions. dampens overall portfolio volatility.

We believe portfolios that leverage the Fundamental investing leverages human-led research to analyze company financials, competitive strengths, and management strengths of both fundamental and quality. By embedding teams locally and engaging not only with a quantitative equity approaches can company’s multiple layers of management but also directly with that company’s ecosystem, including suppliers and competitors— achieve better diversification, greater fundamental equity managers can seek an information edge, resilience, and more consistent outcomes particularly where data is scarce or unreliable. This selective, high-conviction, human-led approach focuses on idiosyncratic, across market environments. sometimes off-benchmark opportunities to identify businesses that appear well positioned to compound value over time.

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