Portfolio Precision

As a growing number of central banks look to tighten mon- ey taps around the world, an important side-effect for equity investors is that company fundamentals should drive their stock prices once again While shareholders generally can have few complaints – the MSCI All Country World Index has almost trebled since Quantitative Easing was rst announced in the US in November 2008 (see note 1) – they will probably need to invest increasingly selectively to protect their gains as the easy money dries up and the stock market correlation it has supported falls away. 


Although low in ation may impact the timing and rate of ta- pering, the winners will be those who have lean portfolios of stocks with downside valuation protection and who have the skill to pick up the best bargains as the tide turns For while a fund’s Active Share(2) – or the extent to which it invests away from the benchmark – tends to explain the majority of outperformance, its level of concentration can also play an important alpha-generating role.