Research Advantage Equity

Philosophy

This is an actively managed portfolio that utilizes an intensive, fundamental research process to identify companies which are outstanding at capital allocation, have strong competitive advantages and operate in strong end-markets.

• Fundamental research and disciplined portfolio construction are the keys to repeatable alpha
• Experience and specialization are required to establish an "information advantage" through research
• Sector-specific valuation methodologies lead to a targeted research approach
• Capturing the "best ideas" of highly experienced analysts using diverse toolkits leads to high information ratios

Objective

The Portfolio seeks to outperform its benchmark, the S&P 500, by 2-3% annually before management fees and other expenses over full market cycles with annualized tracking error of 4-6%.

Process

Investment Process and Portfolio Composition

• Disciplined, bottom-up strategy managed by ING's team of senior sector research analysts
• Custom built, sector-specific quantitative screens evaluate a universe of 1,300 stocks
• Each analyst performs in-depth analysis on their sector's attractively screened companies, generates a list of "best ideas" and weights those ideas according to their conviction levels
• Portfolio is comprised of 50-70 large- and medium-capitalization stocks, though the number of holdings can be customized to suit client needs
• Each analyst is responsible for making selections within their coverage universe and is allocated capital in proportion to the size and scope of their universe
• Sector weightings may at times deviate modestly from those of the S&P 500 due to the analysts' coverage universes not being perfectly aligned with S&P GICS sectors

Sell Discipline

• Stock's relative performance confirms or invalidates original analysis
• Research edge decays with passage of time