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In a world of greater volatility, elevated inflation and higher interest rates, investors need to find sources of real returns to help meet their financial goals. Companies are facing huge challenges to earnings and the winners of yesterday may not be the winners of tomorrow.
Defensive Strategies for Evolving Risks
Investing in Business
— Not Science
Rediscovering the Advantages of US Equities
Finding Growth in
an Unsettled World
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Solutions to Help You Face Today’s Markets with Confidence
So, how can you prepare allocations for such unpredictable conditions? Look for active investing solutions that focus on quality businesses with competitive advantages and pricing power – companies that are better equipped to deliver more consistent outcomes despite the market uncertainty.
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The value of an investment can go down as well as up and investors may not get back the full amount they invested. Capital is at risk.
Defensive Strategies for Evolving Risks
AllianceBernstein’s Kent Hargis discusses the approach for the AB Low Volatility Equity Portfolio, how it’s positioned for the stresses of 2023 and beyond, and explains how the portfolio achieves low volatility without using derivatives.
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Redefining Offense and Defense in Equities: The Evolution of Technology and Healthcare
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For much of the last decade, equity markets were relatively calm. But 2022 reminded investors that, from a historic perspective, that period was an anomaly.
Quality, Stability and Price: The Key Factors in Volatile Markets
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Now problems like inflation, rising interest rates and geopolitical tensions point to the likelihood of ongoing volatility in the future.
But it is possible to gain exposure to equity upside while also mitigating risk, according to Kent Hargis, portfolio manager at AllianceBernstein.
‘Our research shows that stocks of quality companies with stable performance patterns tend to deliver solid returns that outperform bonds and traditional cap-weighted benchmarks over the long term,’ Hargis explained.
This is because quality companies generally have high and stable profitability, steady cashflow, and careful, shareholder-friendly management, while stocks with stability have a proven history of lower volatility. ‘By singling out attractively valued stocks with both of these features, we aim to generate smoother performance patterns that can help investors stay in the market through bouts of volatility,’ he said.
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Inflation risk – quality companies that have strong pricing power as well as consistent profitability can offer a potential counter to inflation.
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Focus on Mitigating Risk
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Equity Markets Have Been Relatively Calm In Recent Years
Global Stocks (SCI World)
Frequency of Rolling 12-Month Returns (USD, Percent)
AllianceBernstein’s Kent Hargis outlines the three pillars that support the firm’s low-volatility approach to equity investing
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The AB Low Volatility Equity Portfolio that Hargis runs was created 10 years ago, in the wake of the global financial crisis. It aims to mitigate volatility via a focus on absolute risk and return, rather than benchmark performance, and is driven by deep research into individual companies’ cash flow sustainability.
The key elements of the fund’s bottom-up, research-driven approach are quality, stability and price (QSP). ‘Our focus on these attributes creates a desirable performance pattern: quality tends to help provide outperformance, stability provides downside mitigation, and by incorporating a perspective on valuation we can avoid pockets of the market that may be crowded, and thus expensive and vulnerable,’ Hargis said. These companies, which he calls quality compounders, have successful business models, sustainable earnings, management teams that are good stewards of capital, and exhibit positive environmental, social and governance (ESG) behaviours.
He believes that these elements also provide valuable mitigation against some of the specific risks in today’s markets:
Slowing growth – the end of easy monetary policy is likely to lead to lower growth across the global economy. Stability can offset slowing growth and earnings risk. ‘Stable companies can help cushion on the downside because they typically have lower beta than traditional growth companies,’ said Hargis.
Interest rate risk – price discipline is important because it leads to investments in companies with reasonable valuations that are less susceptible to price swings driven by rising interest rates.
Investors can find stocks with solid risk-reduction attributes in sectors that aren’t typically favoured in defensive portfolios. For example, technology (tech) has historically been seen as a riskier sector, but tech exposure can in fact play a role in reducing downside risk.
‘Our disciplined approach, emphasizing quality, stability, and price, helps us to find defensive plays within the tech sector – and not just in traditionally resilient areas such as consumer staples,’ said Hargis.
‘By focusing on companies with high-quality earnings and stable revenue characteristics – for example, payments companies, or tech enablers that power the digital platforms that are part of our everyday lives now – tech can become a defensive play within investor portfolios.’
For investment professional use only. Not for inspection by, distribution or quotation to, the general public.
The value of an investment can go down as well as up and investors may not get back the full amount they invested. Capital is at risk. Past performance does not guarantee future results.
Some of the principal risks of investing in the Portfolio include derivatives risk, emerging/frontier markets risk, equity securities risk, small/mid-cap equities risk, currency risk, convertible securities risk, hedging risk, leverage risk and securities lending risk.
A full explanation of the risks is provided in the Portfolio’s Prospectus.
The Portfolio is meant as a vehicle for diversification and does not represent a complete investment program. Prospective investors should read the Prospectus, which includes Sustainability-Related Disclosures, and discuss risks and the Portfolio’s fees and charges with their financial advisor to determine if the investment is appropriate for them.
The AB Low Volatility Equity Portfolio is a sub-fund of AB SICAV I, an open-ended investment company with variable capital (société d’investissement à capital variable) incorporated under the laws of the Grand Duchy of Luxembourg.
The sale of AB funds may be restricted or subject to adverse tax consequences in certain jurisdictions. This information is directed solely at persons in jurisdictions where the funds and relevant share class are registered or at those who may otherwise lawfully receive it. Before investing, investors should review the Fund’s full Prospectus, together with the Fund’s KIID or KID and the most recent financial statements. Copies of these documents, including the latest annual report and, if issued thereafter, the latest semiannual report, may be obtained free of charge from AllianceBernstein (Luxembourg) S.à r.l. by visiting www.alliancebernstein.com or www.eifs.lu/alliancebernstein.com, or in printed form by contacting the local distributor in the jurisdictions in which the funds are authorised for distribution.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams and are subject to revision over time.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
“Stable companies can help to cushion on the downside because they typically have lower beta than traditional growth companies.”
Past performance is no guarantee of future results.
Return buckets are based on returns for the MSCI World. Forward 12-month returns are calculated monthly with the frequency calculated across all months in the period.
*From MSCI World inception on April 1, 1986, to December 31, 2012.
As of December 31, 2022 • Source: MSCI and AB
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Looking Beyond Traditional Ways to Mitigate Volatility
Further Volatility Ahead?
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An Innovative Healthcare Sector Could be Growthier than Meets the Eye
‘If someone needs a new heart valve, inflation isn’t going to impact that decision.’
This statement sums up why Vinay Thapar believes healthcare investing is a good foil to uncertainty in markets, whether caused by inflation, rising rates, or geopolitical uncertainty.
‘The beauty of healthcare is its resilience to macro forces because the average person will need roughly eight surgeries over their lifetime – so everyone’s going to need to utilise the system at some point,’ he says.
The sector’s characteristics make it a good core equity asset – offering not just resilience but also innovation. ‘Healthcare is rightly viewed as a defensive sector because the demand is so inelastic: in 2022 when broader markets were down 18%-20%, the MSCI World Healthcare index was down mid-single digits. But what doesn’t get enough credit is the tremendous amount of innovation going on.’
This level of innovation, often underestimated by investors, gives the sector ‘offensive’ as well as defensive characteristics, Thapar says.
‘People think healthcare innovation is focused on new drug development technologies, but it is much broader than that. Artificial intelligence (AI) could have a very profound impact on the sector. For example, gene sequencing will help to predict cancer through a blood test, while AI companions will help to point out diagnoses that physicians might miss.’
The growth opportunities brought via these innovations are also more durable than those in the wider technology (tech) sector, he adds. ‘In the broader tech world, there’s a lot of innovation, but also a lot of disruption: the company that is the disruptor of today can be the disrupted tomorrow.
‘In healthcare, the cycles are much longer because of factors like patents, the enormous capital investment needed to create a new drug, and so on. There’s a much longer timeline for companies to monetise their innovations.’
Beyond the obvious proposition of a product or service that benefits patients, Thapar focuses on companies that are profitable and create efficiencies for the wider healthcare ecosystem.
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“If someone needs a new heart valve, inflation isn’t going to impact that decision.”
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Traditionally viewed as a defensive sector, advances in artificial intelligence could make healthcare an ‘offensive’ one too.
Offense as Well as Defence
(USD 2022) Percent
An investor cannot invest directly in an index or average, and these do not include the sales charges or operating expenses associated with an investment in a portfolio, which would reduce total returns.
As of 31 December 2022.
Sources: Morningstar, MSCI and AllianceBernstein.
MSCI World Health Care vs. MSCI World
Past performance does not guarantee future results.
The idea that advanced scientific knowledge is needed to predict business success in the sector is a fallacy, Thapar says, noting that the probability a drug will get from human clinical trials to market is around 8%.
Thapar’s approach is based on looking for companies that are compounding: ‘We invest in businesses that are positioned to generate higher returns on invested capital and which are growing their assets; there are plenty of these in the sector,’ he says.
These compounders have historically outperformed: ‘10 years ago, given the choice between investing in the US’s largest healthcare insurer, United Health Group, or the S&P Biotech ETF, most people would’ve chosen the ETF. But anyone making that choice would’ve underperformed United by over 1,000 basis points annually for 10 years.’
Business, Not Just Science
The reason is simple: drug development is so difficult, and the risk of failure so high, that buying exposure to smaller-cap innovation plays is really just exposure to risk and volatility, Thapar says.
‘To drill further: even somebody with a science background who is good at predicting cancer drugs is likely less good at predicting Alzheimer’s drugs, or any of the different subsectors. The focus should be on the characteristics of businesses, rather than trying to predict things that nobody is going to get consistently right over a long period of time’.
For investment professional use only. Not for inspection by, distribution or quotation to, the general public.
The value of an investment can go down as well as up and investors may not get back the full amount they invested. Capital is at risk. Past performance does not guarantee future results.
Some of the principal risks of investing in the Portfolio include allocation risk, derivatives risk, emerging-markets risk, equity securities risk, focused portfolio risk, OTC derivatives counterparty risk and portfolio turnover risk.
A full explanation of the risks is provided in the Portfolio’s Prospectus.
The Portfolio is meant as a vehicle for diversification and does not represent a complete investment program. Prospective investors should read the Prospectus, which includes Sustainability-Related Disclosures, and discuss risks and the Portfolio’s fees and charges with their financial advisor to determine if the investment is appropriate for them.
The AB International Health Care Portfolio is a sub-fund of AB SICAV I, an open-ended investment company with variable capital (société d’investissement à capital variable) incorporated under the laws of the Grand Duchy of Luxembourg.
The sale of AB funds may be restricted or subject to adverse tax consequences in certain jurisdictions. This information is directed solely at persons in jurisdictions where the funds and relevant share class are registered or at those who may otherwise lawfully receive it. Before investing, investors should review the Fund’s full Prospectus, together with the Fund’s KIID or KID and the most recent financial statements. Copies of these documents, including the latest annual report and, if issued thereafter, the latest semiannual report, may be obtained free of charge from AllianceBernstein (Luxembourg) S.à r.l. by visiting www.alliancebernstein.com or www.eifs.lu/alliancebernstein, or in printed form by contacting the local distributor in the jurisdictions in which the funds are authorised for distribution.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams and are subject to revision over time.
References to specific securities are presented to illustrate the application of our investment philosophy only and are not to be considered recommendations by AB. The specific securities identified and described in this presentation do not represent all of the securities purchased, sold or recommended for the portfolio, and it should not be assumed that investments in the securities identified were or will be profitable.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a asis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
Investing in Business
— Not Science
AllianceBernstein’s Vinay Thapar explains why mid- and large-cap healthcare companies create an ideal match of sustainable business models and technological innovations, creating a compelling combination of defensiveness and growth.
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10-year growth of $10 in USD
As of 31 December 2022
Source: Morningstar Direct, S&P and AB
10-Year Growth Chart (USD)
Past performance does not guarantee future results.
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When Less is More
In potentially volatile times, a concentrated approach to portfolio construction might seem riskier than a broader spread of holdings. But Jim Tierney, manager of the AB US Concentrated Equity Portfolio, says that’s not the case.
‘We own 20 names and that’s it. We focus. We find outstanding stocks and we put them in our portfolio. We get diversification by having 20 different and distinct companies,’ he says.
This ability to back his stock picks decisively is based on high conviction and an intensive, bottom-up, research-driven approach.
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Why 20 is plenty for Jim Tierney, Chief Investment Officer of the AB Concentrated US Equity Portfolio.
Concentration vs Diversification
While some forecasters might consider US equities as a whole to be over-valued, Tierney focuses on specific characteristics when looking for stocks: inelastic demand, strong pricing power and the ability to control costs.
‘These competitive advantages help provide a cushion against economic turbulence, and position companies well for earnings success,’ he says.
Inelastic demand – what Tierney calls a ‘toll booth model’– means that demand for these companies’ goods or services doesn’t change much in response to economic weakness.
‘If you wear contact lenses, an economic slowdown is probably not going to prompt you to give them up to save money. You could wear glasses more frequently instead of contacts, but that isn’t the pattern we’ve typically seen,’ he says.
Another example might be a manufacturer of gene sequencing machines that drive innovative, cost-saving medical advances.
‘These types of companies that have a true moat around their products or services are relatively insulated from economic headwinds, and that’s what we’re looking for in all our holdings,’ Tierney says.
Competitive Advantages Cushion Turbulence
For investment professional use only. Not for inspection by, distribution or quotation to, the general public.
The value of an investment can go down as well as up and investors may not get back the full amount they invested. Capital is at risk. Past performance does not guarantee future results.
Some of the principal risks of investing in the Portfolio include allocation risk, derivatives risk, equity securities risk, focused portfolio risk, OTC derivatives risk and REITs risk.
A full explanation of the risks is provided in the Portfolio’s Prospectus.
The Portfolio is meant as a vehicle for diversification and does not represent a complete investment program. Prospective investors should read the Prospectus, which includes Sustainability-Related Disclosures, and discuss risks and the Portfolio’s fees and charges with their financial advisor to determine if the investment is appropriate for them.
The AB Concentrated US Equity Portfolio is a sub-fund of AB SICAV I, an open-ended investment company with variable capital (société d’investissement à capital variable) incorporated under the laws of the Grand Duchy of Luxembourg.
The sale of AB funds may be restricted or subject to adverse tax consequences in certain jurisdictions. This information is directed solely at persons in jurisdictions where the funds and relevant share class are registered or at those who may otherwise lawfully receive it. Before investing, investors should review the Fund’s full Prospectus, together with the Fund’s KIID or KID and the most recent financial statements. Copies of these documents, including the latest annual report and, if issued thereafter, the latest semiannual report, may be obtained free of charge from AllianceBernstein (Luxembourg) S.à r.l. by visiting www.alliancebernstein.com or www.eifs.lu/alliancebernstein.com, or in printed form by contacting the local distributor in the jurisdictions in which the funds are authorised for distribution.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams and are subject to revision over time.
References to specific securities are presented to illustrate the application of our investment philosophy only and are not to be considered recommendations by AB. The specific securities identified and described in this presentation do not represent all of the securities purchased, sold or recommended for the portfolio, and it should not be assumed that investments in the securities identified were or will be profitable.
“If you wear contact lenses, an economic slowdown is probably not going to prompt you to give them up to save money.”
Investments. For the Prepared.
A focus on pricing power is particularly important in an inflationary environment.
‘Companies with products that command customer loyalty and have relatively few substitutes are better positioned to maintain or raise prices without sacrificing demand, even in an economic downturn,’ Tierney says.
Firms such as well-known software providers, payroll systems operators or card networks fall into this category. ‘In most cases, the switching costs are significant and discourage customers from making big changes,’ Tierney notes.
In a higher interest rate environment, the ability to control costs will be vital for earnings growth, he believes. ‘There’s no single solution, but seasoned management normally finds a way to execute against these margin pressures.’
This is another area where on-the-ground research can give investors an edge, he says. ‘I have a team of six people helping me to construct a 20-stock portfolio. They can put in the due diligence, visit the companies, understand the culture and kick the tyres. They can grill the management on their strategies for controlling costs.’
Tierney notes that, while some companies’ share prices and earnings forecasts may reflect the competitive realities, in many cases they don’t.
‘Aggregate market earnings forecasts may be a red herring. Investors should focus squarely on individual company fundamentals to spot market mispricing, while identifying management teams that can harness a company’s core strengths and deliver on earnings expectations.’
Companies with products that command customer loyalty and have relatively few substitutes are better positioned to maintain or raise prices without sacrificing demand, even in an economic downturn.
Rediscovering the Advantages of US Equities
AllianceBernstein’s James Tierney explains why his portfolio contains just 20 stocks and how he gains the required conviction in each of them. He defines the portfolio with three key terms: quality, concentration and growth.
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US Equity Roundtable: Investing
Beyond the AI Darlings
AB Concentrated US Equity Portfolio
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The Golden Rulebook, or Something Like It
In volatile markets, the ability to demonstrate profitable growth both today and in the future is key to generating consistent long-term returns.
‘We’re an earnings-driven strategy. We’re not about blue-sky growth. So we’re really looking to peel away the onion. That means building our own profit & loss (P&L) models and trying to isolate the factors that will allow these companies to make money over a three- to five-year time horizon,’ he says.
USD 2022
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MSCI World Health Care vs MSCI World Health
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What drives consistent business growth? The question is always front and centre for Dev Chakrabarti, Chief Investment Officer of the AB Concentrated Global Equity Portfolio.
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Peeling Away the Onion
Companies Persisting with >=10% YoY Earnings Growth
Top 1,000 global companies (1989–2022)
Past performance does not guarantee future results.
Historical data for informational purposes only. Universe consists of the top 1,000 companies by market cap each year from 1989 through 2022 with annual rebalancing.
As of December 31, 2022
Source: Center for Research in Security Prices, FactSet, S&P Compustat and AB
Key to Successful Growth Investing
A key part of the strategy’s consistency involves avoiding what Chakrabarti calls ‘hyper-growth’.
‘If a large cap company is delivering in excess of 20% growth, the market’s going to judge it on that basis from a valuation point of view. That might be fine, but if there’s a day of reckoning where it falls below that growth rate, there will be a material correction in share price and that’s going to be especially painful for high P/E companies,’ he says.
As a concentrated equity investor, Chakrabarti won’t expose his portfolio to those potential drawdowns. ‘We focus on steady, stable growth, in the corridor of 15-20%. If we can attach client assets to that growing stream of earnings, and if we are judging those earnings correctly, the P/E ratio will expand over time, regardless of short-term volatility.’
Steer Clear of Excess Growth
It doesn't take too many stocks to reduce risk dramatically
Historical data for information only.
As of 31 December 2022. Analysis based on the forecast MSCI World Index single stock volatility using the Global Equity Model for Long Term Investors (GEM LT) from 1 January 2010 through 31 December 2022.
Source: MSCI, S&P and AB
Why Concentrated Portfolios?
Another embedded danger for growth investors is stock momentum: the temptation to ride something that seems to be working.
‘It’s important to us that we don’t hold on for too long,’ Chakrabarti says. ‘We are not “buy and hold” investors, and it comes down to our valuation sensitivity. We uncover names – and ideally, they are cheap to begin with.
‘We’ll hold them until they start to look expensive relative to our valuation targets, and then we’ll recycle into other growth names that look better value.’
This is the advantage of AllianceBernstein’s extensive research team: ‘Our depth of analyst resource means we are constantly looking at a broad universe of names, and that allows us to cycle out when we hit our price targets.
‘When a company starts to get too expensive there’s always another growth name on our research-approved list that’s good value. That keeps us away from momentum.’
Don’t Hold on Too Long
‘It’s conventional wisdom to say there is more rather than less risk in a concentrated portfolio but the academic research we have both commissioned and updated says the tipping point is at 30-35 stocks,’ says Chakrabarti.
Is a Concentrated Equity Portfolio More Risky than a Diversified One?
‘On-the-ground’ research is vital to the process, Chakrabarti says.
‘This is not about a group of analysts and portfolio managers sitting in London or New York, guessing what Asian street food is like. We are meeting with companies in their place of business, wherever that is in the world. We’re seeing what the factory floor looks like. We’re seeing what cars are in their parking lot, even on a Friday when people might be working from home,’ he says.
The analyst team comprises six people in the US, five in Europe and four in Asia. ‘Each analyst is tasked not with covering the entire benchmark, but rather coming up with seven to ten great quality growth names at a good price. That’s where we get the very strong intensity around company research coverage within the team.’
Covering the Mileage
Beating the fade
“Growth is difficult to maintain...but those companies that can consistently grow are
rewarded.”
Investments. For the Prepared.
The benefits of diversification diminish exponentially with more holdings added.
For investment professional use only. Not for inspection by, distribution or quotation to, the general public.
The value of an investment can go down as well as up and investors may not get back the full amount they invested. Capital is at risk. Past performance does not guarantee future results.
Some of the principal risks of investing in the Portfolio include allocation risk, derivatives risk, emerging/frontier markets risk, equity securities risk, focused portfolio risk, OTC derivatives risk, OTC derivatives risk and REITs risk.
A full explanation of the risks is provided in the Portfolio’s Prospectus.
The Portfolio is meant as a vehicle for diversification and does not represent a complete investment program. Prospective investors should read the Prospectus, which includes Sustainability-Related Disclosures, and discuss risks and the Portfolio’s fees and charges with their financial advisor to determine if the investment is appropriate for them.
The AB Concentrated Global Equity Portfolio is a sub-fund of AB SICAV I, an open-ended investment company with variable capital (société d’investissement à capital variable) incorporated under the laws of the Grand Duchy of Luxembourg.
The sale of AB funds may be restricted or subject to adverse tax consequences in certain jurisdictions. This information is directed solely at persons in jurisdictions where the funds and relevant share class are registered or at those who may otherwise lawfully receive it. Before investing, investors should review the Fund’s full Prospectus, together with the Fund’s KIID or KID and the most recent financial statements. Copies of these documents, including the latest annual report and, if issued thereafter, the latest semiannual report, may be obtained free of charge from AllianceBernstein (Luxembourg) S.à r.l. by visiting www.alliancebernstein.com or www.eifs.lu/alliancebernstein.com, or in printed form by contacting the local distributor in the jurisdictions in which the funds are authorised for distribution.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams and are subject to revision over time.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
The Portfolio uses the MSCI World Index as a benchmark for performance comparison purposes only. The Portfolio is actively managed and the Investment Manager is not constrained by its benchmark when implementing the Portfolio’s investment strategy.
Finding Growth in an Unsettled World
AllianceBernstein’s Dev Chakrabarti explains how the AB Concentrated Global Equity Portfolio team identifies the sectors and regions that the fund invests in, and how it maintains its long-term perspective in a rapidly changing world. He highlights the focus on concentration, quality and growth.
Read more
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‘The way we implement concentrated portfolios is by focusing on the quality growth – so it’s not the quality by itself or the growth by itself but the two taken together that drive a better risk profile in the shape of consistent earnings.’
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Global Equity Market and Investment
Podcast with Dev Chakrabarti
AB Concentrated Global
Equity Portfolio
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Chapter 1
Chapter 2
Chapter 3
Chapter 4
Defensive Strategies for Evolving Risks
AllianceBernstein’s portfolio manager Kent Hargis discusses the strategy for the AB Low Volatility Global Equity Portfolio, how it’s positioned for the stresses of 2023 and beyond, and how the Fund achieves low volatility without using derivatives.
01
More for you:
Redefining Offense and Defense in Equities: The Evolution of Technology and Healthcare
AB Low Volatility Equity Portfolio
01
02
03
04
Chapters
Studio video
Investments.
For the Prepared.
For much of the last decade, equity markets were relatively calm. But 2022 reminded investors that, from a historic perspective, that period was an anomaly.
Quality, Stability and Price: The Key Factors in Volatile Markets
Diam donec adipiscing tristique risus nec. Tincidunt id aliquet risus feugiat. Elementum pulvinar etiam non quam lacus suspendisse faucibus interdum posuere. Urna duis convallis convallis tellus id interdum velit laoreet id. Sollicitudin aliquam ultrices sagittis orci a scelerisque purus. Fringilla est ullamcorper eget nulla facilisi etiam dignissim. Diam quam nulla porttitor massa. Cras sed felis eget velit aliquet sagittis id consectetur. Sit amet nisl purus in. Donec adipiscing tristique risus nec feugiat in. Fermentum et sollicitudin ac orci phasellus. Sollicitudin tempor id eu nisl nunc mi. Tincidunt augue interdum velit euismod in pellentesque massa. Nunc sed velit dignissim sodales ut eu sem integer vitae. Sit amet porttitor eget dolor pellentesque diam volutpat commodo. Eget sit amet tellus cras adipiscing enim eu turpis.
Now problems like inflation, rising interest rates and geopolitical tensions point to the likelihood of ongoing volatility in the future.
But it is possible to gain exposure to equity upside while also mitigating risk, according to Kent Hargis, portfolio manager at AllianceBernstein.
‘Our research shows that stocks of quality companies with stable performance patterns tend to deliver solid returns that outperform bonds and traditional cap-weighted benchmarks over the long term,’ Hargis explained.
This is because quality companies generally have high and stable profitability, steady cashflow, and careful, shareholder-friendly management, while stocks with stability have a proven history of lower volatility. ‘By singling out attractively valued stocks with both of these features, we aim to generate smoother performance patterns that can help investors stay in the market through bouts of volatility,’ he said.
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Copy here for the stat
03
Inflation risk – quality companies that have strong pricing power as well as consistent profitability can offer a potential counter to inflation.
Lorem ipsum dolor sit amet, consectetur adipiscing
Lorem ipsum dolor sit amet, consectetur adipiscing
Lorem ipsum dolor sit amet, consectetur adipiscing
Focus on Mitigating Risk
Read more
Equity Markets Have Been Relatively Calm In Recent Years
Global Stocks (SCI World)
Frequency of Rolling 12-Month Returns (USD, Percent)
AllianceBernstein’s Kent Hargis outlines the three pillars that support the firm’s low-volatility approach to equity investing
Terms
Privacy
Cookies
To learn more about AB, visit alliancebernstein.co.uk
Contact our sales team
The AB Low Volatility Equity Portfolio that Hargis runs was created 10 years ago, in the wake of the global financial crisis. It aims to mitigate volatility via a focus on absolute risk and return, rather than benchmark performance, and is driven by deep research into individual companies’ cash flow sustainability.
The key elements of the fund’s bottom-up, research-driven approach are quality, stability and price (QSP). ‘Our focus on these attributes creates a desirable performance pattern: quality tends to help provide outperformance, stability provides downside mitigation, and by incorporating a perspective on valuation we can avoid pockets of the market that may be crowded, and thus expensive and vulnerable,’ Hargis said. These companies, which he calls quality compounders, have successful business models, sustainable earnings, management teams that are good stewards of capital, and exhibit positive ESG behaviours.
He believes that these elements also provide valuable mitigation against some of the specific risks in today’s markets:
Slowing growth – the end of easy monetary policy is likely to lead to lower growth across the global economy. Stability can offset slowing growth and earnings risk. ‘Stable companies can help cushion on the downside because they typically have lower beta than traditional growth companies,’ said Hargis.
Interest rate risk – price discipline is important because it leads to investments in companies with reasonable valuations that are less susceptible to price swings driven by rising interest rates.
Investors can find stocks with solid risk-reduction attributes in sectors that aren’t typically favoured in defensive portfolios. For example, technology has historically been seen as a riskier sector, but tech exposure can in fact play a role in reducing downside risk.
‘Our disciplined approach, emphasizing quality, stability, and price, helps us to find defensive plays within the tech sector – and not just in traditionally resilient areas such as consumer staples,’ said Hargis.
‘By focusing on companies with high-quality earnings and stable revenue characteristics – for example, payments companies, or tech enablers that power the digital platforms that are part of our everyday lives now – tech can become a defensive play within investor portfolios.’
The value of an investment can go down as well as up and investors may not get back the full amount they invested. Capital is at risk. Past performance does not guarantee future results.
Some of the principal risks of investing in the Portfolio include derivatives risk, emerging/frontier markets risk, equity securities risk, small/mid-cap equities risk, currency risk, convertible securities risk, hedging risk, leverage risk and securities lending risk.
A full explanation of the risks is provided in the Portfolio’s Prospectus.
The Portfolio is meant as a vehicle for diversification and does not represent a complete investment program. Prospective investors should read the Prospectus, which includes Sustainability-Related Disclosures, and discuss risks and the Portfolio’s fees and charges with their financial advisor to determine if the investment is appropriate for them.
The AB Low Volatility Equity Portfolio is a sub-fund of AB SICAV I, an open-ended investment company with variable capital (société d’investissement à capital variable) incorporated under the laws of the Grand Duchy of Luxembourg.
The sale of AB funds may be restricted or subject to adverse tax consequences in certain jurisdictions. This information is directed solely at persons in jurisdictions where the funds and relevant share class are registered or at those who may otherwise lawfully receive it. Before investing, investors should review the Fund’s full Prospectus, together with the Fund’s KIID or KID and the most recent financial statements. Copies of these documents, including the latest annual report and, if issued thereafter, the latest semiannual report, may be obtained free of charge from AllianceBernstein (Luxembourg) S.à r.l. by visiting www.alliancebernstein.com or www.eifs.lu/alliancebernstein.com, or in printed form by contacting the local distributor in the jurisdictions in which the funds are authorised for distribution.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams and are subject to revision over time.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
“Stable companies can help to cushion on the downside because they typically have lower beta than traditional growth companies.”
Past performance is no guarantee of future results.
Return buckets are based on returns for the MSCI World. Forward 12-month returns are calculated monthly with the frequency calculated across all months in the period.
*From MSCI World inception on April 1, 1986, to December 31, 2012.
As of December 31, 2022 • Source: MSCI and ABQ
Investments. For the Prepared.
Looking Beyond Traditional Ways to Mitigate Volatility
Further Volatility Ahead?
i
More for you
Redefining Offense and Defense in Equities: The Evolution of Technology and Healthcare
TO learn more about ab, visit
alliancebernstein.co.uk
AB Low Volatility Equity Portfolio
Contact our sales team
Defensive Strategies for Evolving Risks
AllianceBernstein portfolio manager Kent Hargis discusses the strategy for his AB Low Volatility Global Equity fund, how it’s positioned for the stresses of 2023 and beyond, and how the fund achieves low volatility without using derivatives.
01
More for you:
Redefining Offense and Defense in Equities: The Evolution of Technology and Healthcare
AB Low Volatility Equity Portfolio
01
02
03
04
Chapters
Studio video
Investments.
For the Prepared.
For much of the last decade, equity markets were relatively calm. But 2022 reminded investors that, from a historic perspective, that period was an anomaly.
Quality, Stability and Price: The key factors in volatile markets
Diam donec adipiscing tristique risus nec. Tincidunt id aliquet risus feugiat. Elementum pulvinar etiam non quam lacus suspendisse faucibus interdum posuere. Urna duis convallis convallis tellus id interdum velit laoreet id. Sollicitudin aliquam ultrices sagittis orci a scelerisque purus. Fringilla est ullamcorper eget nulla facilisi etiam dignissim. Diam quam nulla porttitor massa. Cras sed felis eget velit aliquet sagittis id consectetur. Sit amet nisl purus in. Donec adipiscing tristique risus nec feugiat in. Fermentum et sollicitudin ac orci phasellus. Sollicitudin tempor id eu nisl nunc mi. Tincidunt augue interdum velit euismod in pellentesque massa. Nunc sed velit dignissim sodales ut eu sem integer vitae. Sit amet porttitor eget dolor pellentesque diam volutpat commodo. Eget sit amet tellus cras adipiscing enim eu turpis.
Now problems like inflation, rising interest rates and geopolitical tensions point to the likelihood of ongoing volatility in the future.
But it is possible to gain exposure to equity upside while also mitigating risk, according to Kent Hargis, portfolio manager at AllianceBernstein.
‘Our research shows that stocks of quality companies with stable performance patterns tend to deliver solid returns that outperform bonds and traditional cap-weighted benchmarks over the long term,’ Hargis explained.
This is because quality companies generally have high and stable profitability, steady cashflow, and careful, shareholder-friendly management, while stocks with stability have a proven history of lower volatility. ‘By singling out attractively valued stocks with both of these features, we aim to generate smoother performance patterns that can help investors stay in the market through bouts of volatility,’ he said.
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Copy here for the stat
03
Inflation risk – quality companies that have strong pricing power as well as consistent profitability can offer a potential counter to inflation.
Lorem ipsum dolor sit amet, consectetur adipiscing
Lorem ipsum dolor sit amet, consectetur adipiscing
Lorem ipsum dolor sit amet, consectetur adipiscing
Focus on mitigating risk
Read more
Equity Markets Have Been Relatively Calm In Recent Years
Global Stocks (SCI World)
Frequency of Rolling 12-Month Returns (USD, Percent)
AllianceBernstein’s Kent Hargis outlines the three pillars that support the firm’s low-volatility approach to equity investing
Terms
Privacy
Cookies
To learn more about AB, visit alliancebernstein.co.uk
Contact our sales team
The AB Low Volatility Equity Portfolio that Hargis runs was created 10 years ago, in the wake of the global financial crisis. It aims to mitigate volatility via a focus on absolute risk and return, rather than benchmark performance, and is driven by deep research into individual companies’ cash flow sustainability.
The key elements of the fund’s bottom-up, research-driven approach are quality, stability and price (QSP). ‘Our focus on these attributes creates a desirable performance pattern: quality tends to help provide outperformance, stability provides downside mitigation, and by incorporating a perspective on valuation we can avoid pockets of the market that may be crowded, and thus expensive and vulnerable,’ Hargis said. These companies, which he calls quality compounders, have successful business models, sustainable earnings, management teams that are good stewards of capital, and exhibit positive ESG behaviours.
He believes that these elements also provide valuable mitigation against some of the specific risks in today’s markets:
Slowing growth – the end of easy monetary policy is likely to lead to lower growth across the global economy. Stability can offset slowing growth and earnings risk. ‘Stable companies can help cushion on the downside because they typically have lower beta than traditional growth companies,’ said Hargis.
Interest rate risk – price discipline is important because it leads to investments in companies with reasonable valuations that are less susceptible to price swings driven by rising interest rates.
Investors can find stocks with solid risk-reduction attributes in sectors that aren’t typically favoured in defensive portfolios. For example, technology has historically been seen as a riskier sector, but tech exposure can in fact play a role in reducing downside risk.
‘Our disciplined approach, emphasizing quality, stability, and price, helps us to find defensive plays within the tech sector – and not just in traditionally resilient areas such as consumer staples,’ said Hargis.
‘By focusing on companies with high-quality earnings and stable revenue characteristics – for example, payments companies, or tech enablers that power the digital platforms that are part of our everyday lives now – tech can become a defensive play within investor portfolios.’
The value of an investment can go down as well as up and investors may not get back the full amount they invested. Capital is at risk. Past performance does not guarantee future results.
Some of the principal risks of investing in the Portfolio include derivatives risk, emerging/frontier markets risk, equity securities risk, small/mid-cap equities risk, currency risk, convertible securities risk, hedging risk, leverage risk and securities lending risk.
A full explanation of the risks is provided in the Portfolio’s Prospectus.
The Portfolio is meant as a vehicle for diversification and does not represent a complete investment program. Prospective investors should read the Prospectus, which includes Sustainability-Related Disclosures, and discuss risks and the Portfolio’s fees and charges with their financial advisor to determine if the investment is appropriate for them.
The AB Low Volatility Equity Portfolio is a sub-fund of AB SICAV I, an open-ended investment company with variable capital (société d’investissement à capital variable) incorporated under the laws of the Grand Duchy of Luxembourg.
The sale of AB funds may be restricted or subject to adverse tax consequences in certain jurisdictions. This information is directed solely at persons in jurisdictions where the funds and relevant share class are registered or at those who may otherwise lawfully receive it. Before investing, investors should review the Fund’s full Prospectus, together with the Fund’s KIID or KID and the most recent financial statements. Copies of these documents, including the latest annual report and, if issued thereafter, the latest semiannual report, may be obtained free of charge from AllianceBernstein (Luxembourg) S.à r.l. by visiting www.alliancebernstein.com or www.eifs.lu/alliancebernstein.com, or in printed form by contacting the local distributor in the jurisdictions in which the funds are authorised for distribution.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams and are subject to revision over time.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
“Stable companies can help to cushion on the downside because they typically have lower beta than traditional growth companies.”
Past performance is no guarantee of future results.
Return buckets are based on returns for the MSCI World. Forward 12-month returns are calculated monthly with the frequency calculated across all months in the period.
*From MSCI World inception on April 1, 1986, to December 31, 2012.
As of December 31, 2022 • Source: MSCI and ABQ
Investments. For the Prepared.
Looking beyond traditional ways to mitigate volatility
i
To learn more about AB, visit alliancebernstein.co.uk
Contact our sales team
More for you:
Redefining Offense and Defense in Equities: The Evolution of Technology and Healthcare
AB Low Volatility Equity Portfolio
Defensive Strategies for Evolving Risks
AllianceBernstein portfolio manager Kent Hargis discusses the strategy for his AB Low Volatility Global Equity fund, how it’s positioned for the stresses of 2023 and beyond, and how the fund achieves low volatility without using derivatives.
01
More for you:
Redefining Offense and Defense in Equities: The Evolution of Technology and Healthcare
AB Low Volatility Equity Portfolio
01
02
03
04
Chapters
Studio video
Investments.
For the Prepared.
For much of the last decade, equity markets were relatively calm. But 2022 reminded investors that, from a historic perspective, that period was an anomaly.
Quality, Stability and Price: The key factors in volatile markets
Now problems like inflation, rising interest rates and geopolitical tensions point to the likelihood of ongoing volatility in the future.
But it is possible to gain exposure to equity upside while also mitigating risk, according to Kent Hargis, portfolio manager at AllianceBernstein.
‘Our research shows that stocks of quality companies with stable performance patterns tend to deliver solid returns that outperform bonds and traditional cap-weighted benchmarks over the long term,’ Hargis explained.
This is because quality companies generally have high and stable profitability, steady cashflow, and careful, shareholder-friendly management, while stocks with stability have a proven history of lower volatility. ‘By singling out attractively valued stocks with both of these features, we aim to generate smoother performance patterns that can help investors stay in the market through bouts of volatility,’ he said.
Inflation risk – quality companies that have strong pricing power as well as consistent profitability can offer a potential counter to inflation.
Lorem ipsum dolor sit amet, consectetur adipiscing
Lorem ipsum dolor sit amet, consectetur adipiscing
Lorem ipsum dolor sit amet, consectetur adipiscing
Focus on mitigating risk
Read more
Equity Markets Have Been Relatively Calm In Recent Years
Global Stocks (SCI World)
Frequency of Rolling 12-Month Returns (USD, Percent)
AllianceBernstein’s Kent Hargis outlines the three pillars that support the firm’s low-volatility approach to equity investing
Terms
Privacy
Cookies
The AB Low Volatility Equity Portfolio that Hargis runs was created 10 years ago, in the wake of the global financial crisis. It aims to mitigate volatility via a focus on absolute risk and return, rather than benchmark performance, and is driven by deep research into individual companies’ cash flow sustainability.
The key elements of the fund’s bottom-up, research-driven approach are quality, stability and price (QSP). ‘Our focus on these attributes creates a desirable performance pattern: quality tends to help provide outperformance, stability provides downside mitigation, and by incorporating a perspective on valuation we can avoid pockets of the market that may be crowded, and thus expensive and vulnerable,’ Hargis said. These companies, which he calls quality compounders, have successful business models, sustainable earnings, management teams that are good stewards of capital, and exhibit positive ESG behaviours.
He believes that these elements also provide valuable mitigation against some of the specific risks in today’s markets:
Slowing growth – the end of easy monetary policy is likely to lead to lower growth across the global economy. Stability can offset slowing growth and earnings risk. ‘Stable companies can help cushion on the downside because they typically have lower beta than traditional growth companies,’ said Hargis.
Interest rate risk – price discipline is important because it leads to investments in companies with reasonable valuations that are less susceptible to price swings driven by rising interest rates.
Investors can find stocks with solid risk-reduction attributes in sectors that aren’t typically favoured in defensive portfolios. For example, technology has historically been seen as a riskier sector, but tech exposure can in fact play a role in reducing downside risk.
‘Our disciplined approach, emphasizing quality, stability, and price, helps us to find defensive plays within the tech sector – and not just in traditionally resilient areas such as consumer staples,’ said Hargis.
‘By focusing on companies with high-quality earnings and stable revenue characteristics – for example, payments companies, or tech enablers that power the digital platforms that are part of our everyday lives now – tech can become a defensive play within investor portfolios.’
The value of an investment can go down as well as up and investors may not get back the full amount they invested. Capital is at risk. Past performance does not guarantee future results.
Some of the principal risks of investing in the Portfolio include derivatives risk, emerging/frontier markets risk, equity securities risk, small/mid-cap equities risk, currency risk, convertible securities risk, hedging risk, leverage risk and securities lending risk.
A full explanation of the risks is provided in the Portfolio’s Prospectus.
The Portfolio is meant as a vehicle for diversification and does not represent a complete investment program. Prospective investors should read the Prospectus, which includes Sustainability-Related Disclosures, and discuss risks and the Portfolio’s fees and charges with their financial advisor to determine if the investment is appropriate for them.
The AB Low Volatility Equity Portfolio is a sub-fund of AB SICAV I, an open-ended investment company with variable capital (société d’investissement à capital variable) incorporated under the laws of the Grand Duchy of Luxembourg.
The sale of AB funds may be restricted or subject to adverse tax consequences in certain jurisdictions. This information is directed solely at persons in jurisdictions where the funds and relevant share class are registered or at those who may otherwise lawfully receive it. Before investing, investors should review the Fund’s full Prospectus, together with the Fund’s KIID or KID and the most recent financial statements. Copies of these documents, including the latest annual report and, if issued thereafter, the latest semiannual report, may be obtained free of charge from AllianceBernstein (Luxembourg) S.à r.l. by visiting www.alliancebernstein.com or www.eifs.lu/alliancebernstein.com, or in printed form by contacting the local distributor in the jurisdictions in which the funds are authorised for distribution.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams and are subject to revision over time.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
“Stable companies can help to cushion on the downside because they typically have lower beta than traditional growth companies.”
Past performance is no guarantee of future results.
Return buckets are based on returns for the MSCI World. Forward 12-month returns are calculated monthly with the frequency calculated across all months in the period.
*From MSCI World inception on April 1, 1986, to December 31, 2012.
As of December 31, 2022 • Source: MSCI and ABQ
Investments. For the Prepared.
Looking beyond traditional ways to mitigate volatility
To learn more about AB, visit alliancebernstein.co.uk
Contact our sales team
More for you:
Redefining Offense and Defense in Equities: The Evolution of Technology and Healthcare
AB Low Volatility Equity Portfolio
Contact our sales team
TO learn more about ab, visit
alliancebernstein.co.uk
More for you:
