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Mo Haghbin

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2024-06-06
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2024-06-06
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  1. “So early in my career, I had a manager that was really thoughtful about how he built the team. And he always said to me, Surround yourself by people that are really smart or smarter than you and try to work yourself out of a job. And I thought that was so interesting because when you're younger, you're like, no, I need this job. I have to pay my rent and I've got all this other stuff going on. And it was really actually quite profound because his point was, you don't have to be the smartest person in the room. You can find people that understand a topic or a subject matter better than you. If you bring all of those people together, you can harvest that collective knowledge. You can create this environment where people are learning through osmosis. And the whole work yourself out of a job was more about if you do a good job to the point where others now have learned a lot and could do the job as good as you, it's time for you to move on. And if you work at good organizations, they'll find you the next job. So I thought that was actually quite profound.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Giving me the opportunity to do something innovative and unique at a time where the firm was going through some transitions. So Oppenheimer Funds was an active, high conviction, international equity-focused franchise. I was the guy from BlackRock trying to launch ETFs. So I give her a lot of credit for seeing an opportunity and giving me the space to actually create something new.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “So I had a manager early in my career at BGI who really took a chance on me. I mean, I don't think I should have gotten that job, to be honest with you. I mean, he saw something in me that I don't think I even knew at the time. And all along the way he invested a lot of time and capital into making sure that I would be successful gave me my first opportunity to lead a team when the acquisition was happening by BlackRock made sure that I found a home on the other side. So it was very, very influential and impactful. More recently, Sharon French, who hired me at Oppenheimer Funds, gave me an opportunity to join the team and actually”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “I would say my biggest pet peeve is parents that apply a lot of pressure to their kids. And I see a lot of this in New York City. You got to get into the Ivy League elementary school. If you don't get into that, you're not going to get into the middle school and the high school. I think we have to be a little bit more tolerant of different paths. I think about my path. I didn't have a really traditional path into finance. There's other ways to get there. And I feel like we've overdone it a bit with the pressure that we put on young people these days.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Well, I have a son that's neurodivergent, and it's actually been probably one of the things that has taught me the most about life and about challenging situations and working collaboratively with people that might not necessarily think the same way or act the same way. He's been actually one of my best teachers, a lot of long nights of understanding how to interact with him. And it's been very rewarding and I've actually spent a lot of time thinking about how to bring some of that neurodivergent thinking into the workforce because I actually think it's missing. I think there's an opportunity for us to really expand the way we think about those skill sets and especially in something like investing, it could be super helpful to have different viewpoints.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Favorite hobby, so I like to travel, and when I travel, I like to be outdoors. So I get back to Colorado probably four times a year. And I sit on the business school board. When I go out there, I like to do a little bit of fishing, a little bit of hiking, chautauqua or the foothills. And that's been one of the things I've always enjoyed as a kid. I grew up camping. We rent an RV and we travel the country. So I have this emotional connection to the outdoors because I grew up in Colorado. I grew up very close to nature. A little bit different now.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “So, I think the biggest trend around solutions is how do we offer a customization to lower account sizes. So this whole customization at scale topic, technology is going to be a big part of that. To your point, how do you manage delivering strategic and tactical asset allocation and manager selection to thousands of individual clients or thousands of smaller accounts? It's technology. So we have to invest there and we have to get better at delivering this value proposition for smaller client sizes.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “So that's interesting because Oppenheimer Funds was private. So I've had both experiences. So I was at a bank-owned asset manager. That's a little bit different. Publicly traded asset manager, private asset manager, and then back to publicly traded asset manager. There are going to be slight differences. Obviously publicly traded, you have more frequent touch points around stock performance and revenue and AUM. But I think it's all about the culture. A publicly traded company can still have long-term orientation. It's about the people that work here. Sometimes I think the market confuses publicly traded means very short-term decision making. That's about the people that run the company. You can get the best of both worlds. It doesn't matter whether it's public or private.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “I've been really fortunate to be given an opportunity with an InvestCo to lead the solutions group. I find Investco to be a little bit in the middle between what I've experienced in the past. So if you think about BGI, BGI was a really academic institution, really smart, really, really focused people, flat organization. I think culturally we tend to be thoughtful. We tend to think about the ramifications of what we're doing both for clients, for shareholders, and our team members. But we also tend to be a bit more action-oriented. We're not going to sit around and debate that for the next five years. So I actually find it to be really, really exciting to work here. And the people have been fantastic.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “It's a fascinating time. We're seeing a lot of innovation in that space. We are finding ways to provide some liquidity. So think about interval fund structures where you usually have a 5% quarterly redemption with a gate. I think these are really interesting structures, but I also think we have to be really, really honest about the fact that you are giving something up to harvest the illiquidity premium. You have to take on the illiquidity risk. There is no free lunch. So these products, I think, are great. They will give you substantially similar exposures, but that liquidity profile is going to lead to slightly different performance outcomes than a long-term allocation to any of those asset classes.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Pull the thread on those private assets and that RIA channel, there's a belief that there's tons of money coming. And then you see some of the larger firms building products that have a different liquidity profile than the institutional tenure life fund with a series of infinite options of additional years after that. What are you seeing in terms of the appetite from some of your clients that want to engage in the private markets that haven't been there relative to the types of products that are offered today?”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Complex thing to do if you don't have the staff. So for a solutions group like ours, we can be the extension of staff. We can help optimize that allocation and deliver something that gets you to your target benchmarker, target policy level without all of the complexity of trying to manage the capital calls and the realizations and the paperwork that comes along with that”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “The market, we still have a significant amount of cash, by the way, on the sidelines. If you look at bank deposits at $17 trillion, money market funds at seven trillion, so there's $25 trillion of assets that are sitting in cash. That's almost $15, 20% of all U.S. wealth sitting in cash. I think there's a huge opportunity for us to think about putting that back to work. And the yields on offer in fixed income are very attractive. So a lot of our conversations with clients are how to actually extend duration, lock in those yields, and really rethink the fixed income allocation. And then on the private market side, we've seen quite a bit of interest in credit strategies, real estate strategies. The combination of those things as well. And I think that's a big opportunity, especially within the wealth channel. How do you fill out a private market's allocation for an advisor? It's a really difficult and”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Sure. So within equities, I think one of the things that is really interesting and part of the reason we went down this path of creating the dynamic strategies. For a long time, the trend was there's no alpha here. So let me just index it. Lowest cost possible. Lowest cost possible. And it's really convenient. It makes life a lot easier. There's zero risk of getting fired. Match the benchmark. I think what we're seeing, especially on the institutional side, is a desire to rethink that, is a desire to be cost conscious, absolutely, but not necessarily give up all expectations of excess return. Equities, I think, are going through a little bit of a revival. They're going through a little bit of a renaissance where clients are starting to rethink that allocation. They're willing to take risk there again. And for a long time, I had not seen that. I'd seen basically a cost mitigation exercise. On the fixed income side, a lot has changed with yields being the most attractive we've seen in a very long time. So a lot of clients are thinking about how to deploy cash back in”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Well, so if we're lucky, we're right 55% of the time. We're probably wrong a lot and we have to get comfortable with being wrong a lot. What I mentioned earlier around repeatable process and making sure that it's articulated, that allows you to then stick with something, even though maybe it's not working in the short term. Because again, there's going to be times where it doesn't work. Think about, for example, our dynamic factor strategies. We have a period of underperformance. Now, do we go and change the process? No, we don't, because we're highly convicted in the process. That's the first step to a death spiral. It is if you keep tweaking and moving back and forth based on current market conditions. So I think one of the things I learned early in my career, and I still believe it, is systematic or investment processes that are well articulated and repeatable tend to have a better”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “The investment part, the less sexy part of it is the operations and the technology part, but without that it would be impossible for us to really do what we do.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “The representative tactical asset allocation. And then what we do is we apply that across accounts that might have restrictions or compliance deviations. So we have an investment group or a portfolio team that focuses on tactical asset allocation. We have a strategic asset allocation team and a manager research team. And then we also have a research and analytics team. So Nick Savalides based out of Boston leads a team that really isn't thinking about necessarily asset allocation decisions in real time but doing research around our methods and our processes to help us better understand changes we may want to make in the future. They're also responsible for the underlying technology that we use both to engage with the client but also to manage the portfolios, which I would not discount. That is such an important part of what we do. We talk a lot about”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “So, it's important to have an investment process that is well defined and repeatable. And I would argue modular so that you can actually bring pieces of it together to meet those customization needs. If you don't have that, then to your point, there's infinite combinations and there's so many different variations, which makes it less likely to scale. And we are in the business of trying to scale this capability. What we've done is created a process where tactical asset allocation is really a risk budgeting process. It's really a way for us to think about short-term deviations from a strategic allocation that then it can apply to many, many accounts underneath based on their underlying constraints. So think about a world where we have a representative account, the representative strategic asset allocation.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “When you have this breadth of client types and you've got these different levers of strategic tactical manager selection, how do you go about organizing the team so that you can deliver these solutions to your client?”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “It depends. And I also think it's not just passive versus active, but vehicle choice. When does it make sense to use exchange-traded funds versus mutual funds versus private vehicles? These are all decisions that the team is making based on what we understand the clients' needs are. A lot of it is driven by what we hear from the client and their preferences. Sometimes they actually have preferences around managers that we then have to incorporate into the portfolio.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “So we have an incredible team. Many of the things that we're talking about are not possible without some of the people that we've hired. So Jeff Bennett on the team, who leads manager selection research and the analysts that support him are tasked with really understanding where it makes sense to source that exposure using lower cost passive exposures and where it actually makes sense by an active manager. The answer is not always passive always for here and active always here.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “When you have that comfort in the process on the strategic asset allocation, tactical allocation manager selection, how do you think about active versus passive and just not filling those portfolios with either an index or a simple factor that gets you where you want to be?”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “Equal weight 500 for U.S. equities, why Investco Core plus for fixed income. So we have to use the same manager selection process. There's no difference between how we think about the scoring of a manager, whether they're within InvestCo or sitting outside of Investco.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “So we've always been, and I think we were early open architecture, we just fundamentally believe that investors are looking for best in class across every one of those portfolio allocations. So we put Invesco through the same process that we would put any other manager. And if we end up being the best manager in that space, then we are deserving of that allocation. It's important because the solutions group is somewhat distinct and objective part of InvestCo. We're not really sitting within an investment team or focused on, again, building bottoms-up portfolios, we are solely responsible for those allocation decisions. And many clients really challenge us there. So think about model portfolios where we're delivering models to financial advisors. They want to understand why you made all those decisions. They want to understand why”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “So you're ultimately filling your portfolio with managers, and you have this interesting seat where InvestCo is managing close to $2 trillion. A lot of those managers, then you've got a much bigger world outside. How do you think about using the internal InvestCo managers compared to an open source platform with managers outside Vesco?”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  26. “And spending time on the qualitative pieces really have an interesting job to getting to know the person or the team behind a strategy.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  27. “That storm better than a company that is going to look to the capital markets for help or doesn't have as much profitability to weather that storm or cushion that storm. So that's been very, very strong. On the manager selection side, it's harder. It's really hard. I think you can use quantitative and qualitative ways to understand manager performance. But in a lot of asset classes, things will surprise you. The best managers will end up being the worst managers. And sometimes you have to almost be a little bit of a contrarian on that. You want to allocate capital maybe at times where managers are struggling rather than delivering really, really good returns. So I would say the hardest part is the manager selection part. I would say our asset allocation decisions, we tend to feel really comfortable with and we understand really well. Our factor exposures, we tend to understand quite well. Managers, it's just tough. It's really, really tough. So I think people that are in that space.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  28. “So the evidence around factor returns and their cyclical behavior is pretty strong. We've seen over seven business cycles that factors tend to behave a certain way. And it's not just because we've looked at the time series and looked at the performance. There's a really good reason if you think about the fundamentals of those factors themselves. Smaller companies tend to be levered. They tend to have less cash flow and they source a lot of their cash flows with external funding. Larger companies, higher quality companies, they tend to be really profitable. They have high return on assets. They source a lot of their cash flow from internally generated activities. They don't rely on debt. So it's really intuitive almost where you say, well, if we go through a recessionary period, the company that has a strong balance sheet internally sourced cash flows, very little reliance on debt is probably going to weather.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  29. “Rest is going to come from idiosyncratic, but we spend all of our time talking about that piece, which I find really fascinating.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  30. “So I think as an industry, we spend a lot of time thinking about the bottoms up piece, idiosyncratic piece, but the majority of your return comes from your top-down asset allocation decisions. So think about really simply if your underweight equities over a prolonged period of time, irrespective of how you sourced that equity exposure, you're probably going to be underperforming your benchmark. If your benchmark is 60-40 and you have a structural underweight of 10% over a 20-year horizon, you have to do a really amazing job picking managers and thinking about style exposures, very difficult to overcome the fact that your underweight equity risk. So the majority of the returns are going to come from your asset allocation decision. I would argue an equal, maybe not exactly equal, but pretty close is going to come from your style decisions.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  31. “I think the challenge and alternatives is that you actually can't really be that dynamic. You can talk about the marginal dollar, but the invested capital tends to be long-term. When we think about assets on the outside, it tends to be more about where we want exposure for the strategic time horizon rather than the tactical time horizon, unless we have new capital to put to work, in which case then we try to understand where we are in the business cycle. So there may be certain asset classes that tend to perform better in early stages of an upswing and certain asset classes that tend to perform better in the early stages of a downswing or in a prolonged contractionary environment. Are you able to raise cash or move between asset classes or not? The answer is generally not. So we tend to keep that portion of the portfolio fairly static.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  32. “Now in equities and fixed income, the levers are reasonably known in terms of the drivers of return. You get into some of the alternative categories. Some of it is a little harder to put your finger on what's going to move the needle. So how do you think about that structure applying it to alternatives?”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  33. “So it depends on how we would implement in a lot of our allocation products, what we like to do is not move the managers. So remember, we are not taking securities, we're picking managers and changing managers can be actually quite cumbersome. It could actually lead if it's a taxable account to a tax event. So we try to take that tactical view and overlay space when possible. So think about adding duration using Treasury futures. Think about adding credit or subtracting credit risk using CDX.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  34. “With fixed income, the factors that drive the majority of the returns are different. So you can explain most of the return and fixed income, looking at interest rate sensitivity and credit exposure. If you have international, then FX would also be in there. But the same applies when we think about allocating capital to fixed income. What is the duration profile of our benchmark? Where are we relative to that? What is the credit risk of the benchmark? Where are we relative to that? So it's all relative to benchmark. And if we are more defensive, then we might be adding interest rate risk or adding the sensitivity to duration. So getting longer duration, if we are more optimistic, we might be increasing the credit risk of the portfolio.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  35. “That two by two, you're talking about recoveries and slowdowns. So, slowdown is where growth is above its historical average. But the market is telling us that sentiment is shifting. So in those periods, we would still be a bit more defensive, where we would introduce momentum is really at those cyclical peaks and troughs. So what I mean by that is we generally wouldn't want to be in momentum when there's a sharp reversal. It tends to have really bad reversals. So those factor exposures are actually preset. We're not sitting around debating whether or not we like size or value today. They're preset based on where we are across those four regimes.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  36. “So, if you look at this 2x2 matrix effectively of where you are on risk appetite, You mentioned positive, positive, and negative, negative. How do you think about the other two? So economy strengthening but risk appetites decreasing or economies softening risk appetite is increasing.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  37. “momentum because there's a clear trend with growth. Conversely, if our leading economic indicators are showing that growth is below trend and decelerating, that's generally a sign of a contraction. So we would then get more defensive in the portfolio. We would upweight higher quality, larger companies, lower volatility companies. All of that is systematically done. There is no discretion per se. The discretion is how we build the models, how we think about the world. But then as we implement the portfolio, we try to remove the emotion. We try to remove the day-to-day biases. We are all subjected to a lot of information. You wake up in the morning and then the news flow dominates your day. We don't want that creeping into the portfolio.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  38. “Way we're talking about this is very conversational, very casual, it's much harder than the way we're Having this conversation, we take all the emotion out of it. That's the first step. We aren't waking up every day and saying, how do we feel about the market? We build models. So we have a model for leading economic indicator, basically trying to understand through the data whether the economy is growing above or below its long-term trend. We also have a model for risk appetite. This basically measures in aggregate what capital market participants are experiencing as they move out on the risk curve. Those two models combine tell us a little bit about how we should position across the factor set. If leading economic indicators suggest that the economy is growing above its long-term trend and risk appetite is accelerating, that's a pretty healthy environment for risk assets. That's an expansionary environment. And we're going to favor small and mid-cap stocks.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  39. “That set of decision factors of what's happening in the economy that's leading you to be procyclical, there are other people that might look at it and say, well, the same set of factors would tell me to be contrarian. The market thinks rates are coming down. That's good. Well, maybe now's the time to be more cautious. How do you get from looking at the set of factors to making the decision about where you want to bring your client portfolios?”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  40. “And what I find quite interesting, we used to do asset allocation studies for clients every two to three years. Now imagine if you haven't done an asset allocation study for two to three years. Interest rates have moved from 0 to 5.5%. The world is completely different. And if you haven't changed your asset allocation, you're probably missing something. I believe that given the importance of equities within the portfolio and alternatives and other strategies have been very popular. But equities is still the largest allocation in the portfolio. Thinking about that allocation in a more dynamic fashion, given the speed at which things change, is becoming more important.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  41. “So, our models generally tend to change two to three times a year. So they are pretty dynamic. I would call them low frequency quantitative strategies. If I look at our current positioning, tends to be a bit more pro-cyclical. We tend to favor smaller and middle capitalization companies, value-oriented companies, because what we're seeing from the economy is actually quite impressive. It's been very resilient. Most people expected a recession by now. We haven't had a recession. Employment is very stable. The consumer is pretty healthy. Generally speaking, in periods of economic expansion and recovery, factors and sectors that have higher operating leverage and more beta to the market tend to outperform. So that's how we're positioned. But we can review that on a monthly basis. So if something changes, we reserve the right to also change. So it's a little bit more of a dynamic approach to thinking about it.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  42. “Think about factor investing, the starting point is be overweight, all factors equally because their excess returns are negatively correlated and over time you will get the benefit of diversification. We agree with that. There's nothing wrong with that approach. But we also understand that over shorter horizons, taking views on factors, taking views on certain styles can be beneficial. So if your benchmark is the broad market cap, your long-term position is a overweight to certain rewarded factors. Your tactical position is how do you adjust that overweight given what's happening in the market today? How should I tilt my portfolio away from both my benchmark and a neutral overweight factor portfolio to harvest potentially excess returns over a shorter horizon?”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  43. “There's this marriage that you're describing between strategic asset allocation and tactical allocation. So on the strategic side, let's just say value works if you have a 25-year horizon. Nobody has a 25-year horizon. You better figure out what to do in the middle. How do you bring those together to figure out where you are in a regime?”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  44. “Structurally allocating to factors are rewarded but most CIOs, most people sitting in portfolio management seats don't have twenty years. They have to also generate returns over three, five, seven, and ten-year horizons to keep their jobs. So we felt like it was very important to think about equities a slightly different way. And we used the products within our own portfolio.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  45. “So, what are cyclical assets or what are counter cyclical assets? And then we said, okay, what if we just took that same framework and applied it within equities? Are there factors or sectors that also behave that way? And what we found is the answer is yes. So things like size and value tend to be more pro-cyclical. Things like quality and low volatility tend to be counter-cyclical. They're more defensive. And are we able to actually systematically harvest those style preferences using a business cycle framework? And in 2017, we partnered with FTSE Russell. We created a suite of indices, and we started allocating based on historically rewarded factors during stages of a business cycle. So think of recovery, expansion, slowdowns, and contractions. How should we overweight or underweight factors to get potentially the best possible outcome in the shorter period? We know over the long term.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  46. “This is where we have spent a lot of time over the last few years taking acid allocation frameworks and applying them within an asset class. So you mentioned equities. We, like everyone else, noticed that it was increasingly difficult to add value to drive alpha within parts of the equity portfolio. So think large cap US equity is very difficult to add excess returns. And we had a problem. We had a very large part of the portfolio allocated there. It's actually the largest for most clients. But it was harder to generate returns beyond the broad-based indices. And we developed something that I think is quite innovative. We started out thinking about asset allocation decisions. We use a regime-based framework. So we understand economic growth and changes in economic growth in the sensitivity of asset classes to those changes.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  47. “So, if you take equity as an example, you mentioned valuation, you could think of the basic factor assessment, quality, size. What are the levers that you'd like to pull and just say your equity portfolio?”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  48. “It's this combination of our expectations around asset class returns with what we have historically seen rewarded in market, what structural factors, whether they're behavioral or risk-based, have been rewarded by the market.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  49. “So, great question. For strategic asset allocation, historically, what many firms have done and what we also do is think about capital market assumptions. So we're looking at essentially estimated risk and return for asset classes over a 10-year horizon. The problem with that is it's really hard to estimate what returns are to be expected from equities 10 years from now or what risk should be expected. So we take that approach and combine it with things that I think are a little bit easier to predict. What we're trying to understand is historically speaking what structural long-term bets have been rewarded. I'll give you an example. Value. Valuation is something that over the long term we see has been rewarded. That doesn't mean that over three or five or seven or ten year periods it's going to be rewarded and we've seen that. We've experienced that in a more recent times. But we think that's a long-term structural bet.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source

  50. “Because it's bringing the puzzle pieces together. It's a little bit art and science. You can't perfectly do that through your regular analytics reports and reports that you get from the systems. You have to really think about both the quantitative and qualitative aspects of what makes a manager successful and how that manager behaves with other managers in the portfolio.”

    2024-06-06 · Capital Allocators · Mo Haghbin - Customizing Solutions from the Top Down at Invesco (EP.390) · IDENTIFIED FROM THE TRANSCRIPT · source