Investment Management

Portfolio Engineering

Philosophy | Markets | Traditional | Portfolio | Stock Returns | Fixed Income

Our portfolio structure is based on leading research by Eugene Fama of the University of Chicago and Kenneth French of Dartmouth College. Their analysis of the sources of investment returns has reshaped portfolio theory and greatly improved understanding of the factors that drive equity performance.

• Three Factors 

  • Equity Market (complete value-weighted universe of stocks) Stocks have higher expected returns than fixed income.
  • Company Size (measured by market capitalization) Small company stocks have higher expected returns than large company stocks.
  • Company Price (measured by ratio of company book value to market equity) Lower-priced "value" stocks have higher expected returns than higher-priced "growth" stocks.

The notion that equities behave differently from fixed income is widely accepted. Within equities, differences in stock returns are best explained by company size and price characteristics. Taken together, the three factors on average explain more than 96% of the performance of diversified stock portfolios.

Investment products offered by Strategic Capital Trust Company are: