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Equity Strategies

Domestic Passive

Amalgamated Bank's LongView family of equity index strategies provide investment results that approximate the performance of the targeted Standard & Poor's Composite Index (the "S&P Index"). The strategies invest in all the stocks that are contained in the targeted S&P Index, in approximately the same proportions as they are represented in that Index. This indexing technique is known as "full" or "complete" replication.

Equity index strategies offer the advantage of low portfolio turnover and related transaction expense. Generally, Amalgamated will only rebalance the equity index strategies due to changes in the composition of the applicable index and the timing and size of admissions and withdrawals.

The passive equity strategies may also employ Standard & Poor's Depository Receipts ("SPDRs") or similar exchange-traded funds, stock index futures contracts, options on stock index future contracts and options on securities indices only in anticipation of taking a market position when available cash balances do not permit an economically effective trade in the cash market.

Domestic Active

Amalgamated Bank's active investment strategies provide investment results that exceed returns of the corresponding benchmark by 100 to 150 basis points over a market cycle. This strategy contemplates that Amalgamated will invest in some, but not necessarily all, of the common stocks included in the S&P 500 Index. The intent is to maintain overall investment characteristics similar to the benchmark index, but not to fully replicate the index. We look to add value to the portfolio through a highly-controlled process that employs quantitative analysis of portfolio behavior and other methods of statistical analysis.

This strategy employs a three-step decision-making process for portfolio management:

  1. Classify stocks by growth rate
  2. Calculate expected return
  3. Construct optimal portfolio

Step 1: Classify Stocks by Growth Rate

A universe of the 3000 largest U.S. stocks is segmented into categories according to growth rates, ranging from slow growth to fast growth. This categorization facilitates applying the most appropriate selection criteria for each type of stock.

Step 2: Calculate Expected Return

Different valuation models are applied to each category of stocks (from Step 1) to calculate an expected return or alpha for each stock in the universe. The primary factors include valuation indicators such as (forward-looking) earnings price (e/p) and book to price (b/p) (and the changes in these variables), news regarding future growth opportunities, insider trading, measures of earnings quality and reliability and recent price performance. The models for slow growth stocks emphasize variables related to current fundamentals (e.g., price to earnings, price to book). The models for fast growth stocks emphasize variables related to future earnings (estimate changes). Once each stock has been evaluated, an expected return is assigned.

Step 3: Construct Optimal Portfolio

Using an internally developed optimizer, portfolios are constructed that maximize expected return (calculated in Step 2) subject to targeted tracking error and constraints on specific risk exposures. Deviations from the benchmark on exposures such as size, growth/value, industry, sector and individual security risk are constrained so that portfolios focus risk where it is most likely to add value.

International

Amalgamated Bank currently offers investors two strategies to gain exposure to international equities. Our objective is to exercise sound investment judgment to achieve competitive risk-adjusted rates of return, while creating value for employers and workers. Benchmarked against the Morgan Stanley Capital International (MSCI) EAFE Index, Amalgamated Bank makes investments in a broad universe of companies headquartered outside the United States.

The LongView International Value Equity strategy's investment objective is to provide superior risk-adjusted returns through an opportunistic value-oriented process using foreign equities. The assets are invested in companies that are undervalued and where a catalyst exists to unlock value or improve profitability. The stock selection process is structured to exploit opportunities created by disparities between investor perceptions and underlying fundamentals in the capital markets. Independent analysis focuses on traditional value metrics while qualitative analysis seeks to identify misperceived fundamentals, competitive advantages, financial strength, opportunistic catalysts, and franchise quality.

The LongView Quantitative International Equity strategy employs the same disciplined, risk controlled approach as described in the Domestic Active Equity section above. The strategy seeks to add value over the benchmark by systematically identifying and exploiting investor mistakes resulting from human bias. Customized models rate 3000 non-US developed market stocks, emphasizing selection criteria with the most predictive strength for each category of stocks. Permissible investments in the Quantitative International strategy will include stocks that are constituents of the MSCI Investable Markets Index and the FTSE All World Ex U.S. Index as well as stocks that are not constituents in a major index but are evaluated by the sub-advisor and / or held in other international equity portfolios managed by the sub-advisor.

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