Produced in partnership with Robeco

With an enviable investment heritage stretching back almost 100 years, fundamental equity strategies have always adapted to deliver returns even in the toughest investment times.

To optimise investment performance, fundamental equity strategies take a data-driven approach to selecting the companies across sectors and geographies that will power economic growth in the future.
Outperformance by US companies through the “Great Moderation” since 2009 has left investors with an overweight allocation to US growth stocks, especially in the technology sector. Retaining this overweight due to the built-in inertia of index allocation could be less than optimal in the long term.

Moreover, the global economy is undergoing significant change due to geopolitical shifts, technological advancements, and demographic and environmental challenges.

In 2025, a resilient and agile investment strategy is needed to manage:

• Policy uncertainty: The prospect of sweeping trade policy changes driven by the US, with uncertain outcomes at country, sector and company level.
• The economic cycle: Risks of slowing global growth, persistent inflationary pressures, and diverging central bank actions add complexity to the outlook.
• Geopolitics: Tensions and evolving alliances in international relations create unpredictable risks and opportunities.

By investing in global equities, both in developed and emerging markets, investors can gain exposure to economic growth, inflation protection, and geographic diversification, benefiting from or mitigating all these trends. In this new era of volatility and rapid change, active approaches that truly deviate from market indices will make a significant difference to investment outcomes.

Time-tested strategies
A core allocation to global equities is a key component of a resilient portfolio. A high-conviction equity strategy provides essential exposure to the global economy’s main drivers through market cycles. Other fundamental strategies offer exposure to favourable demographics and rising affluence in Asia, Latin America, the Middle East, Central Europe and Africa, giving investors a stake in our collective global future.
High-conviction strategies aim to outperform reference indices over a three- to five-year investment horizon. This approach results in concentrated portfolios of attractive stocks featuring a high active share and low turnover.
Only those stocks in which an investment team has the highest conviction are included in the portfolio. The benchmark-agnostic and unconstrained character of high-conviction strategies allows portfolio managers to select stocks considered to be attractive from a fundamental, valuation, and sustainability point of view.

Conviction takes time

As these portfolios are often contrarian and truly differ from market indices, it may take time for the investment case to develop. It’s important, therefore, not only to have a high active share portfolio but also a long investment horizon. As an additional benefit, this results in lower portfolio turnover and hence lower transaction costs.
Robeco complements fundamental stock selection analysis by screening the investment universe with a proprietary quantitative model to illustrate behavioural biases of market participants, such as overconfidence and herd behaviour; and to reveal patterns that portfolio managers may have missed. This provides another advantage over passive investment strategies.

Sustainability is integrated into stock selection using ESG factors to provide a more holistic understanding of a company’s risk profile. In emerging markets, this is especially helpful to overcome low transparency, more limited governance standards, and, sometimes, lax product safety standards.

A data-driven, high-conviction approach to selecting companies across the sectors and geographies that will power economic growth in the future can help mitigate the worst potential effects of an overweight position to US equities, especially where that position is unintentional and has come about due to the outperformance of the US market since 2009.

Hauke Ris is co-head of Robeco’s sustainable global equity team and heads the fundamental equity CPM team. He’ll be visiting Australia in November this year.

Find out more about high-conviction equities today

https://www.robeco.com/en-au/products/fundamental-equities