To deliver on our objective of maximizing return per unit of risk, we don’t rely on just a single source of insight; rather, we have built a three-part equity investment process that extracts value from the combination of three investment disciplines:
We begin with reliable idea generation from our cross-sectional and industry specific quantitative models and robust fundamental industry reviews. These outputs give us a detailed view of stocks’ underlying characteristics and behavior.
We research and identify improving fundamentals in names poised for significant and sustainable positive change. We vet the best ideas coming from our quantitative models by conducting deep industry reviews, focused company specific valuations and insightful bull/bear stress tests.
We construct the portfolio leveraging macro insights that clarify the risks within the portfolio from multiple vantage points including our own view on economic sectors.
Portfolios are used to replicate selected indices and achieve benchmark returns with minimal dispersion. The trade-offs between tracking error and transaction costs are carefully monitored to achieve the goal of minimum performance variance from the selected benchmark.
We use a variety of indexing methodologies for portfolio construction. These include full index replication and optimization. The selection of the methodology is based on an analysis of account size, index names, and liquidity considerations of the benchmark.
The focus of portfolio monitoring throughout the investment process is minimizing cash exposure, managing accrued dividends and corporate actions, and ensuring compliance with client guidelines and restrictions. These result in the minimum variance possible from the selected benchmark.
Piedmont’s Yield Advantage strategies are grounded in the belief that yield is the most reliable tool for generating alpha and optimizing return per unit of risk. The goal of our philosophy is to deliver long-term results that maximize the contribution of yield to total return, while preserving capital. Typically, this yield advantage is derived through credit, optionality, and other spread products, but can be attained through duration based on the stage of the business cycle.
We also believe that the best way to maximize yield’s return contribution is with an investment process that has multiple levers for success. Consistent with this view, the Yield Advantage process works to extract alpha contributions from three areas: Quantitative idea generation, fundamental credit research, and macro insights. The use of multiple alpha sources diversifies our performance and increases its reliability.
Portfolio managers leverage firm-wide macro insights to position portfolio’s duration opportunistically based on:
Quantitative modeling generates insights on issuer and sector pricing anomalies including:
Research analysts conduct fundamental work that forms the foundation for security selection and sector rotations including:
Piedmont Investment Advisors, LLC is an independent investment adviser registered with the SEC. Piedmont Investment Advisors, LLC claims compliance with the Global Investment Performance Standards (GIPS®). The firm is independently verified by ACA Performance Services, LLC (previously verified by Ashland Partners, LLP). The firm maintains a complete list and description of composites, which can be obtained by contacting Marion White, Senior Vice President, Chief Compliance Officer at 919-688-8600.