Bradley Needham & Co is an independent investment management firm dedicated to delivering an investment experience that helps people get more out of life.
As an independent firm, our global organization is solely focused on investment management. We direct all of our intellectual capital, global strength and operational stability toward helping clients achieve their investment objectives.
- Specialized investment teams managing investments across a comprehensive range of asset classes, investment styles and geographies.
- With over 700 employees and associates we focused on client needs across the globe.
- Proximity to our clients with an on-the-ground presence in 25 countries.
- Solid financials, an investment grade debt rating, and a strong balance sheet.
Our single focus is to help clients achieve their investment objectives
Bradley Needham & Co are well-positioned to help clients achieve their investment objectives, due to our Pure Focus on “Smart-Bata” investing and Factor Investing
We believe the best investment insights come from specialized investment teams with discrete investment perspectives, operating under a disciplined philosophy and process with strong risk oversight. Our pure focus on investment management eliminates the distractions that compromise results
Smart Beta investing combines the benefits of passive investing and the advantages of active investing strategies.
The goal of smart beta is to obtain alpha, lower risk or increase diversification at a cost lower than traditional active management and marginally higher than straight index investing. It seeks the best construction of an optimally diversified portfolio.
In effect, smart beta is a combination of efficient-market hypothesis and value investing.
Smart beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional market capitalization-based indices. Smart beta emphasizes capturing investment factors or market inefficiencies in a rules-based and transparent way. The increased popularity of smart beta is linked to a desire for portfolio risk management and diversification along factor dimensions, as well as seeking to enhance risk-adjusted returns above cap-weighted indices.
Breaking Down 'Smart Beta'
Smart beta strategies seek to passively follow indices, while also taking into account alternative weighting schemes such as volatility, liquidity, quality, value, size and momentum. That's because smart beta strategies are implemented like a typical index strategies in that the index rules are set and transparent. They will differ from standard indices, such as the S&P 500 or the Barclays Aggregate, in that the indices focus on areas of the market that offer an opportunity for exploitation.
Equity smart beta seeks to address inefficiencies created by market-capitalization-weighted benchmarks. Managers may take a thematic approach to managing this risk by focusing on mispricing created by investors seeking short-term gains, for example.
The smart beta investment approach applies to asset classes outside of equities to include fixed income, commodities and multi-asset classes.Smart Beta was first theorized by economist Harry Markowitz via his work on modern portfolio theory.
Bradley Needham & Co Investment Capabilities
Helping investors worldwide achieve their financial objectives
Great ideas from transcend borders at Bradley Needham with dedicated investment professionals worldwide and on-the-ground presence in 25 countries, serving clients in more than 150 countries. Bradley Needham has the global capability to deliver our best ideas to investors around the world. Our clients benefit from our:
- Commitment to investment excellence
- Depth of investment capabilities
- Organizational strength
- Global footprint
High-quality results begin with specialized insight and disciplined oversight.
The listed investment capabilities and vehicles are not available in all jurisdictions globally. Additionally, not all investors are eligible to invest in each investment vehicle.
- Market cap
- Investment style
- Global/regional/single country
- Single and multi-factor
- Low volatility
Fixed Income and Money Market
- Cash management
- Single and multi-sector
- Tax-free bonds
- Customized solutions
- Active balanced
- Risk parity
- Target maturity/age-based
- Target risk
- Traditional balanced
- Absolute return
- Market neutral
- Global macro
- Private equity
- Buyout, emerging, venture
- Fund of funds
- Financial structures
- Bank loans
- Credit arbitrage
- Real estate
- Public real estate securities
- Private direct
- US, Asian, European, global
Capabilities delivered to investors through diverse investment vehicles
- Institutional separate accounts
- Collective trusts
- Mutual funds (open/closed end, on/offshore)
- Exchange-traded funds (ETFs)
- Unit investment trusts (UITs)
- Private placements
- Separately managed accounts/unified managed accounts
- Variable insurance funds
What We Do
Bradley Needham & Co Global Factor Investing Research
Our original research explores the growth of factor investing through in-depth face-to-face interviews with chief investment officers, strategy unit executives and factor specialists at 66 leading global institutional investors, asset consultants and private banks.
We spoke with investors that were leading the way when it came to factor investing as well as ‘non-users’ who have not yet adopted this investment approach.
We Focus on Factor Investing and “Smart-Beta”
Factor investing is an investment approach that involves targeting quantifiable firm characteristics or “factors” that can explain differences in stock returns. Over the last 50 years, academic research has identified hundreds of factors that impact stock returns . Security characteristics that may be included in a factor-based approach includes size, value , momentum , asset growth, profitability, and leverage.
A factor-based investment strategy involves tilting equity portfolios towards and away from specific factors in an attempt to generate long-term investment returns in excess of benchmarks. The approach is quantitative and based on observable data, such as stock prices and financial information, rather than on opinion or speculation.
History and evolution
The earliest theory of factor investing originated with a research paper by Stephen A. Ross in 1976 on Arbitrage Pricing Theory , which argued that security returns are best explained by multiple factors. Prior to this, the Capital Asset Pricing Model (CAPM), theorized by academics in the 1960s, held sway. CAPM held that there was one factor that was the driver of stock returns and that a stock’s expected return is proportional to its beta, or sensitivity to equity market returns.
In the following decades, academic research has identified more factors that impact stock returns. For example, in 1981 a paper by Rolf Banz established a size premium in stocks—that smaller company stocks outperform larger companies over long time periods.
In 1992, Eugene F. Fama and Kenneth B. French published a seminal paper that demonstrated a value premium, or the fact that expected returns of value stocks were higher than for growth stocks.
In 1993, Sheridan Titman and Narasimhan Jegadeesh showed that there was a premium for investing in high momentum stocks. Other significant factors that have been identified are measures of corporate profitability, asset growth, external financing, leverage and research and development costs.
The Value Factor
The earliest and most well-known factor is value, which can be defined primarily as change in the market valuation of earnings per share ("multiple expansion"), measured as the PE ratio. The opportunity to capitalize on the value factor arises from the fact that when stocks suffer weakness in their fundamentals, the market typically overreacts to it and values them extremely cheaply relative to their current earnings. A systematic quantitative value factor investing strategy therefore buys those stocks at their cheapest point and holds them until the market becomes less pessimistic about their prospects and re-values their earnings.
Why Factor Investing is Becoming More Popular
Many equity investors in search of higher returns at lower costs have turned to Factor Investing.
Traditional active managers tend to select investments based on analysis of individual companies and their stocks. In contrast, factor strategies focus on the common characteristics, or factors, that are most likely to outperform the market, and then invest in stocks with exposure to that factor. For example, the value factor includes stocks that are inexpensive relative to the market, and the momentum factor includes stocks that have seen recent price acceleration.
As the upper chart shows, several factors have delivered excess return (“alpha”) on an annualized basis over a nearly 50-year time period. With factor investing, just like with any investment strategy, valuations matter.
The lower chart highlights this by showing the current valuation of several factors relative to their historical range. At the high end, low volatility is trading at 88% of its most expensive price, meaning it is relatively expensive right now. At the lower end, value is only trading at 27%, suggesting it may still have more room for appreciation.
What it means for investors
Even if current valuation levels hold, an expensive starting point reduces future return prospects. Investors who are evaluating factor strategies will want to consider price, focusing on factors that are cheaper today and therefore have the potential for excess returns in the future. In addition, focusing on diversification across factors is an important way to address this risk.
Dynamic Multi-Factor Investing is a Timely Solution for “Smart-Beta” Investors
Equity Markets have had an incredible run since the global financial crisis, but with prospects for lower returns and the persistent failure of traditional stock pickers to beat their benchmarks, investors are seeking strategies that provide the potential for more reliable outperformance.
Many may consider smart beta strategies, which can offer the potential for higher returns and can serve as a complement to traditional approaches in a diversified equity allocation. Yet the increasingly disparate smart beta and factor landscape can be overwhelming, and as with any investment approach, there are risks of both underperformance and performance-chasing.
A word about risk:
Equities may decline in value due to both real and perceived general market, economic and industry conditions.
Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets.
Model Risk is the risk that the investment models used in constructing the Underlying Index may not adequately take into account certain factors and may result in a decline in the value of the Underlying Index and, therefore, the Fund.
Management and Tracking Error Risk is the risk that the portfolio manager’s investment decisions may not produce the desired results or that the Fund’s portfolio may not closely track the Underlying Index for a number of reasons.
Derivatives may involve certain costs and risks, such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested.
Bradley Needham & Co Explores Global Factor Investing
We examined five key Factor Investing themes.
- How low yields and stock market volatility have encouraged greater interests in factor investing.
- The Multiple Pathways available to Factor Investing
- Factor Investing with Private Banks and Advisors in supporting their high net worth clients
- The role of External Managers and Consultant in considering how they can help institutions achieve their factor investing objectives
- The Growth Potential for Factor Investing
Contact Us for portfolio structuring surrounding Smart-Beta and Factor Investing