A Winning Turn-Key Solution for Firms That Use Outside Managers

SMA’s and more recently UMA’s have become a big part of investment professional’s strategies because it provides the manager access to world class strategies at a lower cost than a typical mutual fund.

AFG has been providing direct model delivery for the past 13 years and we have established a following for our flagship strategy, The AFG50, because of the consistent outperformance, low turnover characteristics and supporting research information that is provided in a transparent way.

The 50-company large-cap portfolio has delivered nearly 5000 bps of alpha since inception while maintaining sector neutrality, annual turnover of around 15%, and providing full transparency on all adds/drops, all of which make the AFG50 a very easy transition for investment firms.

The stocks selected for the AFG 50 must meet a set of decision rules developed by The Applied Finance Group centering around each company’s intrinsic value and market price. each company meeting quantitative hurdles is then reviewed by AFG’s analyst team to address the qualitative issues that the default model may not identify. Each company has a custom model updated by AFG analysts every quarter, who also provide prompt comments about the latest developments of the companies in the AFG50. AFG analysts also strive to achieve a desired level of diversification for the 50 names, to avoid any unintended exposure to a given economic factor.

The goal of the AFG50 was to be an extension of an investment firm’s research department, by providing a strategy that could outpace the S&P500 that was fully supported with custom reports and models. We have implemented a backup list of companies that could potentially replace AFG50 holdings as additional ideas and to ensure that clients do not liquidate positions that could end up in the portfolio. We have also built tools to help clients efficiently transition legacy positions in client portfolios that they may not follow closely to the AFG 50.

Because of our research roots, clients of the AFG50 have a number of resources to help them better understand why each company is part of the strategy. We provide a complete suite of tools to stress-test custom models built by our team of analysts, the ability to understand the embedded expectations in a company’s stock price, complete transparency for every trade and timely updates on any significant events. We have maintained the same consistent process since inception and have never strayed from our core valuation principles for the last 13 years and it has helped us build a reputation as a trusted partner of investment firms around the globe.

To learn more about the AFG50, our process and other value-add services provided by The Applied Finance Group. Email us at Sales@afgltd.com.

In our next post we will provide an excerpt from an AFG50 report to highlight one of the holdings in the portfolio, stay tuned.


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