The Power of Alpha and How to Systematically Capture It

Executive summary

Global equities: key for long-term growth

Exposure to global equities remains a cornerstone allocation for institutional investors. Over the last 20 years, global equities have consistently delivered long-term economic growth, technological innovation and productivity gains, serving as a natural hedge against inflation. However, the critical question for investors is no longer whether to allocate to global equities, but how to construct this exposure to meet specific risk and return objectives.

The active versus passive debate: think ‘and’, not ‘or’

The perennial debate between active and passive management often forces a false choice. We believe an efficient global equity portfolio blends low-cost market exposure (beta) with skilled active management (alpha). Whilst passive investments have attracted hundreds of billions of dollars over the last decade, this influx has created historically high concentration risks within major indices. As markets show signs of improving breadth, active management is positioned to demonstrate its true value by delivering alpha.

Systematic fundamental strategies for alpha

Systematic investing offers a robust method to capture alpha. By harnessing large datasets, advanced technology and investment innovation alongside experienced human oversight, systematic fundamental strategies build disciplined and repeatable portfolios. This approach may assess every company within an investment universe daily against traditional fundamental metrics and alternative factors. Systematic strategies may evaluate the entire market, aiming to identify long-term winners whilst avoiding persistent underperformers.

Allspring global equity core exposure

Allspring has used a proprietary alpha model for over three decades to manage systematic core equity strategies, blending quantitative insights with fundamental validation to avoid unintended exposures and deliver consistent returns. Building on this expertise, our solutions include Global Equity Enhanced Income, Climate Transition Global Equity and the newly launched Global Equity Core strategy. We believe combining systematic active and passive exposures may help investors navigate shifting market conditions and enhance long-term portfolio performance.

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STRATEGY RISKS

Market risk: security markets are volatile and may decline significantly in response to adverse issuer, regulatory, political or economic developments with different sectors of the market and different security types reacting differently to such developments.

Equity securities risk: equity securities fluctuate in value and price in response to factors specific to the issuer of the security, such as management performance, financial condition and market demand for the issuer’s products or services, as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions.

Small-cap securities risk: if a strategy invests in the securities of smaller-capitalisation companies, these securities tend to be more volatile and less liquid than those of larger companies.

Foreign securities risk: if a strategy invests in the securities of non-US issuers, these investments may be subject to lower liquidity, greater price volatility and risks related to adverse political, regulatory, market or economic developments and may be affected by changes in foreign currency exchange rates.

Investors should know that this strategy deployed may be subject to additional investment risks. For important information about the investment manager, please refer to the investment manager’s Form ADV Part 2, which is available upon request.

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

All investing involves risks, including the possible loss of principal. There can be no assurance that any investment strategy will be successful. Investments fluctuate with changes in market and economic conditions and in different environments due to
numerous factors, some of which may be unpredictable. Each asset class has its own risk and return characteristics.

This marketing communication is for professional/institutional and qualified clients/investors only. Not for retail use. Recipients who do not wish to be treated as professional/institutional or qualified clients/investors should notify their Allspring contact immediately.

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