MPSY · Benchmark S&P 500
Mandate
The fund seeks better than benchmark risk and return by investing in securities that provide superior total return. It takes exposure to systematic equity factors, such as value, momentum and quality, through ETFs with dedicated systematic exposures, through individual securities, or through both.
The approach
The committee does not select companies on the merits of a business. It selects rules. A factor is a characteristic that has historically been associated with a return premium, and the committee decides which factors to hold, how to measure them, how to combine them, and how often to rebalance.
Most systematic investors buy the securities that score best on a factor and short those that score worst. The fund cannot short, so the committee expresses its views by holding more of the securities that score well than the benchmark does, and less of those that score badly. Understanding what that constraint costs, and how to get the most out of a long-only factor portfolio, is central to the committee's work.
In the annual report
The annual report sets out the factors each year's committee chose, how it implemented them, and how they performed.