Philosophy: The Dynamic Nature of Generating Alpha

Arrowstreet believes that equity markets are inefficient, and that a well conceived investment process can generate excess returns relative to passive benchmarks. In particular, the firm believes that for information to be applicable in an active investment process it must be both relevant to share prices and slowly reflected in share prices. It is Arrowstreet’s belief that the most valuable (and often overlooked) insights for forecasting equity returns are found by observing information pertaining to related securities. This information is not as obvious and is generally reflected more slowly in share prices.

In addition, Arrowstreet believes that active management is an intrinsically dynamic activity. What worked in the past may work less well, if at all, in the future. To this end, the firm continually reinvests in research and infrastructure in order to maintain sustainable sources of competitive advantage and alpha.

Finally, Arrowstreet believes that with the right combination of investment insights and quantitative tools, the firm can increase the risk-adjusted returns on client portfolios, even after accounting for the transactions costs of active management.