Exploring Risk From Every Angle: Systematic Core Equity

John Campbell: Today's markets are complex, and risk can emerge from many angles. This is why we believe relying on just one perspective isn't enough. For us, evaluating risk means building a complete picture. Without research, it's nearly impossible to understand the risks involved in investing. That's why the Systematic Core team blends our advanced quantitative tools with deep, fundamental analysis to gauge the true picture of investment risk. Starting with the bottom left quadrant, when we apply quantitative risk models from the bottom up, we get a clear view of fundamental risks. These risks are typically referred to as common factor or style risks. We use a research-based model to keep our strategies on track. This helps us control how much our results might differ from the market and avoid risks that don't fit with our investment approach. Why? Because if we take on risks that don't align with our strategy, it can water down performance, create surprises, and make it harder to deliver consistent results. Moving to the top left quadrant, we want to be mindful of macroeconomic forces. Think of this as big-picture stuff that can shake up the market. These are forces we can't control but we need to watch closely—things like interest rates, changes in commodity prices, and global trends in yields. Keeping an eye on these helps us understand how broad economic shifts might impact our investments so we can make smarter decisions in a constantly changing world. Quantitative risk models have been foundational to our team's process since the 1990s, providing what we believe is repeatability and consistency. But we also think that relying on these models alone would leave out half the picture. Numbers don't tell the whole story. Some risks are harder to measure or only matter for a short period of time—things like geopolitical tensions, new technologies shaking up an industry, or sudden policy changes. These emerging risks don't always show up in traditional models, but they can have a big impact on markets. That's why we look beyond the data to identify these trends early and adjust when needed. Qualitative analysis applied from the top down helps us stay ahead of the curve, not just react to it. Finally, we dig deeper at the company level to find idiosyncratic risks—unique challenges like lawsuits, regulatory roadblocks, or negative sentiment. Our portfolio managers go beyond traditional models by tapping into diverse sources—news trends, corporate actions, and even unusual price moves. This bottom-up approach gives us a clearer view of company-specific risks and helps us avoid costly surprises. And now, we see the full picture—a multidimensional approach to risk that allows us to navigate complex markets with greater clarity, precision, and confidence. Our risk management approach guides us in seeking companies we believe offer attractive valuations and strong fundamentals. Through this disciplined process, we strive to build portfolios designed to navigate changing market conditions and align with client objectives.