SAN FRANCISCO — Returns for Barclays Global Investors' enhanced equity business have skyrocketed after the strategies posted staggeringly low returns last year.
Year to date through June 30, all of the firm's Alpha Tilts strategies — worth a combined $110 billion — posted positive returns against their respective benchmarks, landing some of them in the top quartile against their peers, according to data from eVestment Alliance, Marietta, Ga.
The reversal comes after a rocky 2007, where the credit crunch hammered the firm's enhanced portfolios. Several strategies were down more than 500 basis points vs. their respective indexes, and one was down 1,381 basis points against its index. Investors typically expect enhanced strategies to bring in between 100 and 200 basis points of outperformance (Pensions & Investments, Jan. 7).
Officials at BGI credit the turnaround to slight modifications made to the firm's investment process since the end of 2007. These include adding more industry-specific analysis and new valuation metrics, said Russ Koesterich, managing director and head of investment strategy for active equities at BGI.
Still, the earlier poor performance combined with weak equity markets took a toll on assets under management.
Assets for the firm's largest enhanced strategy, the $32 billion Alpha Tilts Fund, are down 36% for the year ended June 30. Assets for the $18.2 billion Russell 3000 Alpha Tilts Fund were down 33% for the year ,while the $155 million Russell 2000 Growth Alpha Tilts Fund was down 53%. The majority of the drop is the result of market movements, with very little attributed to client outflows, said Mr. Koesterich. He could not provide specific data before press time.