The financial markets have a long and distinguished history of implementing value investment techniques which involved acquiring undervalued productive assets. Value investing has been considered an essential component of the landscape of equity investment for the majority of the last century. Despite this, there is still a substantial level of uncertainty around value investment, despite the fact that this is the case. While value advocates, whether openly or implicitly, contribute to the spread of misinformation, their opponents also do so to discredit the approach.

The authors address several of the most prevalent misconceptions, including the notion that value investing is only effective in concentrated portfolios, that it is a "passive" strategy, that it involves purchasing subpar companies, which implies that it is a poor investment strategy, that it is a redundant factor in the presence of newly emerging academic factors, and that it is most successful—and in fact, some claim only useful—in a long-only equity context. The writers also dispute the generally held view that value is nothing more than a type of compensation for risk involved in the process. They come to the conclusion that the existence of the value premium is still unknown, since it is not obvious if the value premium is the result of behavioral or risk-related causes. It is likely that both behavioral and risk-related factors contribute to the value premium. Additionally, they believe risk-based explanations do not improve value or other component persistence.

A methodological framework guides every action we take. Our team at TD ICAV has utilized a continuous cycle of design, refinement, testing, and repetition over the course of 20 years to create our models.

Among the several investing "styles" that have developed as attractive sources of alternative returns, there are four that are known as value, momentum, carry, and defensive. These approaches, when executed as long/short strategies with negligible correlations to other assets, have created positive long-term returns over a wide range of asset categories and markets. Investors have a common perception that equities and bond premia are the most reliable sources of long-term investment returns, but it is possible that they are unduly dependent on these sources. We believe that in order to achieve long-term investment success, it is necessary to harvest multiple independent sources of returns in a cost-effective manner. These sources of returns include long-only market premia (such as stocks and bonds), as well as alternative risk premia (such as hedge-fund risk premia and style premia).

Investors typically underestimate the potential diversification benefits of mixing several styles because they frequently analyze the premiums of each style separately. In the same way that multi-strategies alternatives may profit from diversification, multi-style alternatives can accomplish the same thing. The purpose of this article is to investigate the intuition and evidence that underpin various investment techniques, as well as to provide a strategy for accessing these sources of returns within a framework that is liquid and market-neutral. We are of the opinion that designs have the potential to fulfill the requirements of a large number of investors by offering a source of returns that is for the most part untouched by conventional risk factors, while also providing diversification into traditional alternatives. With the advent of market-neutral daily liquidity strategies, investors may have access to an additional instrument that provides them with the opportunity to achieve their return objectives.

This quarter's Alternative Thinking investigates the parallels and contrasts between systematic and discretionary investment techniques. Specifically, we focus on the similarities between the two. There are substantial parallels between the two, despite the fact that they are different: both can be firmly grounded, relying on comparable economically intuitive inputs, but in different ways. Not only do we address the many misunderstandings that exist surrounding systematic managers, but we also address the alleged black-box character of these managers. One of these misunderstandings is the notion that "they all do the same thing." Nevertheless, we show that the correlations between the active returns of individual systematic managers are quite low, and they are equivalent to the correlations between managers who use discretionary management. We present empirical evidence of the performance and risk of systematic and discretionary managers, arguing that neither group has been fundamentally superior to the other and that they may serve as excellent complements in investor portfolios. This supports our contention that neither group has been intrinsically better than the other.

Providing our customers with additional value in the areas of portfolio creation, risk management, and trading is something that we strive to do. We apply both qualitative and quantitative instruments throughout the entire investing process, and we are extremely thorough in every element.