Lumen’s portfolio construction and asset allocation process starts with helping investors to clearly define their investment objectives, which can be mapped to a Predefined (Model) Universe, built up by factors that align with the investment strategies and investor’s goal.
Lumen discusses factor investing, an investment approach where stocks are selected based on quantifiable factors that drive the differences in risk or rate of return of stocks. The article describes the history of factor investing and provides insights into the use of various factors in portfolio construction and how Lumen quantifies these factors, especially the unique Economic Value Added (EVA) concept as metrics of value. We also shared some observations of the factors selected.
Global Sectors Outlook as of June 2022 using the Residual Income Model and Lumen calculated Cost of Equity
Selected Regional Markets Outlook as of June 2022 – Value vs. Risk
Please check out the Intrinsic Value column for the ranking of value and the Intrinsic Risk column for the ranking of risk – based on the Residual Income Model.
The money management industry is undergoing a seismic shift. The old active money management model picking stocks, bonds, or star managers no longer provides a reliable source of return. Active and detailed global asset allocation that is highly customized is becoming the most effective investment style for outstanding results.
Wealth managers, family offices, and other institutional investors will be empowered by digital investment solutions that leverage essential data, technology, and financial innovations to perform crucial investment functions at a fraction of the cost of an entire investment team. Moreover, as wealth changes hands, investment advisors that incorporate digital tools can better capture this new generation of wealthy clients.
Using the Lumen Global Value Compass calculated market-implied expected returns and stress-testing with the Residual Income Model, we discovered lots of value dispersion regionally and within the emerging world. Intrinsic risk is more skewed towards EM than DM.
