{"id":263368,"date":"2025-09-17T07:37:20","date_gmt":"2025-09-17T07:37:20","guid":{"rendered":"https:\/\/www.quoniam.com\/?p=263368"},"modified":"2026-02-06T09:59:06","modified_gmt":"2026-02-06T09:59:06","slug":"enhanced-strategies-equity","status":"publish","type":"post","link":"https:\/\/www.quoniam.com\/en\/interview\/enhanced-strategies-equity\/","title":{"rendered":"Global Equities Enhanced: Finding the sweet spot between passive and active investing"},"content":{"rendered":"\n
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With global equity markets highly efficient and fee pressure ever-present, many professional investors default to broad equity ETFs as core portfolio building blocks. However, this approach also comes with limitations\u2014especially when it means paying for returns that often lag the benchmark after fees. Enhanced offers a compelling alternative: a disciplined, data-driven way to stay close to the benchmark while seeking incremental, consistent outperformance.<\/p>\n\n\n\n

Let\u2019s start with the basics. What are enhanced strategies, and how do they differ from active or passive investing?<\/strong><\/p>\n\n\n\n

Roc\u00edo:<\/strong> Enhanced strategies sit between the extremes. Investors get the discipline and diversification of passive investing, but with more intelligence behind the stock selection. Enhanced is about small, systematic tilts away from the benchmark\u2014based on forward-looking signals. These tilts are designed to generate a little bit of extra return, without straying far from the benchmark.<\/p>\n\n\n\n

So you’re not making big bets?<\/strong><\/p>\n\n\n\n

Roc\u00edo: <\/strong>Exactly. The tracking error is low\u2014typically 0.5% to 1.5%. That\u2019s very different from high-conviction active managers. But within that range, you can still outperform the benchmark if your models are strong. The goal is to deliver consistent, risk-adjusted alpha in a scalable way.<\/p>\n\n\n\n

Many investors ask: if I\u2019m already in a low-cost ETF, why should I pay more for an enhanced product?<\/strong><\/p>\n\n\n\n

Mark:<\/strong> It\u2019s a fair question. The key is that pure passive never outperforms after fees\u2014by definition. And it replicates the benchmark regardless of fundamentals and sentiment. You take everything, good and bad.<\/p>\n\n\n\n

With an enhanced strategy, you pay a bit more, but you have a real chance of earning that back over time. Especially in global equities, where broad benchmarks are often cap-weighted and concentrated, even modest improvements in stock selection can make a meaningful difference.<\/p>\n\n\n\n

What about risk? Some investors are cautious about straying from the benchmark\u2014even slightly.<\/strong><\/p>\n\n\n\n

Roc\u00edo:<\/strong> That\u2019s a very reasonable concern. But the strength of a systematic, model-based approach is that we can see all risk exposures simultaneously\u2014across sectors, regions, styles, and individual securities\u2014during portfolio construction. It\u2019s not about reacting after the fact; the optimisation engine incorporates risk, return, and implementation costs all at once, allowing us to stay tightly aligned with the benchmark while allocating capital where it\u2019s most effective.<\/p>\n\n\n\n

We don\u2019t take large directional bets or introduce unintended biases. Active weights are spread across hundreds of small positions, making the portfolio highly diversified and stable. And because tracking error is precisely controlled, investors always know the boundaries we\u2019re operating within.<\/p>\n\n\n\n\n\n