Strategy Spotlight

The Value of RAE Fundamental in Today’s Markets

RAE Fundamental Portfolio Managers Rob Arnott and Chris Brightman explain why systematic active strategies may be poised to benefit from the nascent shift from growth to value – and the challenges of traditional active stock picking.

More from this section

Read Transcript

John R. Cavalieri, Product Manager, Asset Allocation: Hello, my name’s John Cavalieri at PIMCO. Today I'm joined by Rob Arnott, founder, chairman and CEO of Research Affiliates, and to Rob’s right is Chris Brightman, chief investment officer at Research Affiliates. Gentlemen, thank you for joining us here today.

Rob Arnott, Chairman and CEO, Research Affiliates: Thank you.

Chris Brightman, Chief Investment Officer, Research Affiliates: You’re Welcome

John: The goal of today is to provide an overview of the PIMCO RAE Fundamental Equity Strategies.

Chris, these RAE fundamental equity strategies, now PIMCO is manager alongside with Research Affiliates, you two as co-PMs on the strategies — why is now a great opportunity to invest in these systematic, active strategies?

Chris: One reason is the prolonged period of underperformance of value stocks, the outperformance of growth stocks, glamour stocks, stocks that have high-quality, low-volatility, etc. I think that period seems to have come to an end,

Chart: The bar chart compares value less growth cumulative returns for U.S. large cap and U.S. small cap. Value's leadership (2016) follows 10 years of outperformance by growth stocks (2005-2015). The period for both assets classes underperforms from 2005-2015 and outperforms for 2016.

and we're more likely to revert to a prolonged period of value companies outperforming, as has been the long-term history in capital markets. Generally, stocks with cheaper prices outperform more expensive stocks.

But that growth-value dispersion opened up to an extreme, began to collapse a little bit, but that's reassuring. And so now is, I think, an excellent opportunity to be in a value strategy in general.

Systematic strategies have the potential to add value in a more transparent, in a more consistent fashion than traditional fundamental stock picking.

Sure, there are always going to be some good stock pickers out there. But it's extraordinarily difficult for the typical investor to figure out who among those fundamental stock pickers that did well over the last three or five years are going to continue to do well over the next three to five years. The history of active management in the mutual fund industry doesn’t compel confidence that investors have that ability to find those outperforming managers.

Much more consistency in a systematic process.

Rob: In fact, I'd go one step further. In our research we've found that trailing three-year performance is the best predictor of future three-year performance. Unfortunately, it has the wrong side. So one of the most powerful ways to invest is to find the 10% of mutual funds that have the worst three-year track record and buy them. Nobody’s going to do that. But, this is a strategy that will tend to be buying the stocks that those managers own.

And so it's embedded, it's inherent in the strategy to do this contrarian buying of what's deeply out of favor, and easing off on what's popular and beloved.

John: Okay, so very consistent then with the contrarian ethos that tends to be defining characteristic of the products that Research Affiliates puts out broadly.

Great. Well, on behalf of Rob Arnott and Chris Brightman, Thank you.

For more information visit pimco.com

Filters: Reset All

Filters

Close Filters Dropdown
  • Tags

    Reset

    Close
  • Category

    Reset

    Bond by Bond
    Careers
    Economic and Market Commentary
    Investment Strategies
    PIMCO Foundation
    PIMCO Education
    View from the Investment Committee
    View From the Trade Floor
    Viewpoints
    Education
    Close
  • Order By

    Reset

    Alphabetical
    Most Recent
    Close
() filters applied

Multimedia Finder

Filter By:
  • Bond by Bond
  • Careers
  • Economic and Market Commentary
  • Investment Strategies
  • PIMCO Education
  • View from the Investment Committee
  • View From the Trade Floor
  • Viewpoints
  • Understanding Investing
  • A
  • B
  • C
  • D
  • F
  • G
  • H
  • I
  • K
  • M
  • N
  • O
  • P
  • R
  • S
  • T
  • W
  • Y
Clear
Tina Adatia
Global and Core Fixed Income Product Strategist
Del Anderson
Credit Analyst
Joshua Anderson
Portfolio Manager, Income and Asset-Backed Securities
Robert Arnott
Founder and Chairman, Research Affiliates
Andrew Balls
CIO Global Fixed Income
Justin Blesy
Asset Allocation Strategist
Meredith Block
ESG Research Analyst
Allison Boxer
Economist
David L. Braun
Head of US Financial Institutions Portfolio Management
Jelle Brons
Portfolio Manager, Global Investment Grade Credit
Erin Browne
マルチアセット戦略担当ポートフォリオ・マネージャー
Esteban Burbano
Fixed Income Strategist
Grover Burthey
Portfolio Manager, ESG
Libby Cantrill
Public Policy
Stephen Chang
Portfolio Manager, Asia
Devin Chen
Portfolio Manager, Commercial Real Estate
Josh Davis
Global Head of Risk Management
Pramol Dhawan
Head of Emerging Markets Portfolio Management
Joachim Fels
Global Economic Advisor
David Fisher
Co-Head of Strategic Accounts, U.S. Global Wealth Management
Nick Granger
Portfolio Manager, Quantitative Analytics
Adam Gubner
Portfolio Manager, Distressed Debt
Gregory Hall
Head of U.S. Global Wealth Management
Ray Huang
Portfolio Manager, Real Estate
Daniel H. Hyman
Head of Agency MBS Portfolio Management
Daniel J. Ivascyn
Group Chief Investment Officer
Mark R. Kiesel
CIO Global Credit
Ryan Korinke
Global Head of Sustainability
Jason Mandinach
Head of Alternative Credit and Private Strategies
Samuel Mary
ESG Research Analyst
Scott A. Mather
CIO U.S. Core Strategies
Kyle McCarthy
Alternative Credit Strategist
Mohit Mittal
Portfolio Manager, Multi-Sector
James Moore
Alfred T. Murata
Portfolio Manager, Mortgage Credit
John Murray
Portfolio Manager, Commercial Real Estate
Roger Nieves
Jason Odom
Strategist, Asset Allocation
Rick Pagnani
Head of Insurance-Linked Securities
Sonali Pier
Portfolio Manager, Multi-Sector Credit
Lupin Rahman
Head of EM Sovereign Credit
Steve A. Rodosky
Portfolio Manager, Real Return and Long Duration
Emmanuel Roman
Chief Executive Officer
Steve Sapra
Client Solutions & Analytics
Jerome M. Schneider
Head of Short-Term Portfolio Management
Marc P. Seidner
CIO Non-traditional Strategies
Emmanuel S. Sharef
Portfolio Manager, Asset Allocation and Multi Real Asset
Greg E. Sharenow
Portfolio Manager, Commodities and Real Assets
Anmol Sinha
Candice Stack
Head of Client Management, Americas
Kimberley Stafford
Global Head of Product Strategy
Cathy Stahl
Global Head of Marketing
Christian Stracke
Global Head of Credit Research
Geraldine Sundstrom
Portfolio Manager, Asset Allocation, EMEA
Richard Thaler
シカゴ大学ブース・スクール・オブ・ビジネス 経済学・行動科学専門特別教授
Jessica K. Tom
Senior Credit Analyst
Francois Trausch
CEO and CIO, Allianz Real Estate
Megan Walters
Global Head of Research, Allianz Real Estate
Qi Wang
CIO Portfolio Implementation
Jamie Weinstein
Portfolio Manager, Head of Corporate Special Situations
Tiffany Wilding
North American Economist
Andrew T. Wittkop
Portfolio Manager, Treasuries, Agencies, Rates
Nelson Yuan
PIMCO
Chris Brightman
Chief Executive Officer and Chief Investment Officer, Research Affiliates
  • Alphabetical
  • Most Recent
Section : Date : Experts :
Reset All
Markets send mixed economic signals – and open the door for active bond investors
Taking Credit: Current Opportunities in Public and Private Markets
Recession Watch: What to Expect and When
Slowing Growth, Rising Inflation and the Fed
Higher Yields Mean More Value in Bonds Today
Resilience Required: A Guide for Investors

Load more results Load {{cCtrl.fetchResults}} more results