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Structured Equity Small Cap Short Extension (130-30) Long Short Mega Cap

Quotient Mega Cap

Return and Risk Targets

Quotient Mega Cap seeks to outperform a mega cap benchmark such as the S&P 100 or Russell 200 over a full market cycle targeting an annualized excess return of 1.5% with a tracking error of 3.0%.

Investment Process

Quotient evaluates a mega cap universe of 300 stocks daily to seek investment opportunities. The firm's focus is on stock selection which is driven by Quotient's insights into the valuation of companies operating within an industry. The valuation models incorporate fundamental, technical, as well as value, growth, and momentum factors from multiple categories. Quotient looks at this information both in terms of relative comparisons between companies in the same industry and trends over time. Quotient builds a unique model for each industry based on the price drivers that are predictive in that industry. In total, there is a unique valuation model for each of the 56 industries that a the firm follows. The combination of these industry models is designed to produce high risk-adjusted returns.

Portfolio Construction and Risk Control

The important factors for the portfolio construction process include company valuations, risk model forecasts, risk budgeting allocations, and transaction cost estimates.  These data are used in a portfolio construction process to arrive at the target positions. Risk Management is integral to our disciplined quantitative process. The majority of the active risk comes from individual stock selection, while industry risk and style risk account for a small portion and active market risk is close to zero. This results in a broadly diversified portfolio with no concentrated positions or bets.

Portfolio Characteristics

The portfolio typically holds 100 stocks with a holding period of 3 to 6 months. Quotient Mega Cap is ready to be launched as soon as capital is received The maximum over or under weight for a stock is typically 2% and the maximum deviation for the aggregate weight of an industry is 2% from the benchmark weight. The overall exposure of style factors is constrained to avoid any significant style or capitalization bets. The strategy is offered as a separate account.