Acadian believes that markets are inefficient, and that such inefficiencies are caused in part by systematic mistakes in investor behavior, as well as structural features of markets. To that end, Acadian applies fundamental insights in an objective and regimented manner in an effort to find attractive investment opportunities and attempt to exploit these mispricings. We believe that securities and markets have many attributes that are related to potential outperformance, and that a successful investment approach must be multi-faceted and adaptable.
At Acadian, there are a number of insights that lie at the core of our overall investment philosophy that are directly applicable to our long/short strategies. We believe that markets are inefficient because of the failure of investors to always act rationally. Investors have "mental models" of how stock prices are set, and due to external and internal (psychological) factors, these change frequently. Further, there is extensive empirical evidence of mispricings created by these inefficiencies, covering multiple time periods and across global markets. In our opinion, a disciplined, objective approach is the best way to try to exploit these opportunities. Acadian also recognizes that markets are adaptive, that investment strategies go in and out of favor and risk/reward relationships change over time. We acknowledge the essentiality of recognizing shifts in the market environment, and knowing the value of different pieces of information at different points in time across the markets where we invest. Employing dynamic investment strategies adapted to the current market environment is the key to helping clients achieve their goals.
Acadian's long/short strategies aim to provide diversification in a broader portfolio of investments, with the goal of offering uncorrelated risk and returns. The ability of long/short strategies to pursue absolute returns, while aiming to neutralize unrewarded systematic risks, is the purest expression of our return forecasts, resulting in a return stream that seeks to be independent of equity market behavior. The focus on absolute return and risk allows our portfolio management team to seek maximum exposure to the stock selection return factors that we believe are likely to deliver the desired excess return.
As an active investment manager, Acadian believes that our ability to add value is derived not only from our ability to select what we believe to be attractive stock opportunities, but also the application of that selection process across the broadest possible universe of global stocks. We employ a fundamentally-based quantitative process that converts wide-ranging investment insights into forecasts. Our stock forecasts incorporate multi-factor analysis from both bottom-up and top-down perspectives. In addition, our approach is disciplined, regimented and systematic, with the goal of avoiding the cognitive and behavioral errors that befall many investors.