A: Because we use an absolute threshold regarding the dividend yield, we deviate from the MSCI World Index in terms of regions and sectors. For example, right now we don’t have any holding in Japan because we can’t find any name in our field. We are currently overweight in Europe and Southeast Asia and we are underweight in the U.S. versus the MSCI World Index. Because of our quality bias, we are not afraid to deviate in terms of regional and sector location. However, for risk-control purposes we avoid concentration and the risk of resembling a pure utility or real estate fund.

We have put some risk constraints regarding the maximum overweight in terms of sector and regions versus the MSCI World allocation. For example, the maximum overweight in a sector is between 10% and 15% versus the index, but we still have regional and sector deviation. We haven’t been able to buy any Japanese equities, but we can find other opportunities in the market. In Southeast Asia we found plenty of attractive names to compensate for the underweight in Japan.

So the quantitative screen and the dividend yield threshold work as a top-down strategy. If the quant screen shows that there are plenty of names in a specific region or sector, and if those names offer good value, we’ll go into that sector or region. The beauty of the product is that the absolute threshold ensures a dynamic strategy over time. For example, five years ago we had huge exposure to the utility sector, where we could find plenty of undervalued names, but that’s not the case anymore. Today we find more opportunities in the media or the telecom sectors, which were considered growth sectors five or six years ago.

Q: How do you define the long term? What’s the turnover of the fund?

A: The goal of the product is to select the names that we believe offer high and sustainable dividend yields, or the names in which we have confidence for the long run. The average holding is between three and five years. Of course, for some names we have shorter holding periods, but we build the positions for the long run. Our turnover is between 50% and 60%. We’re not day traders, we don’t time the markets, and we invest in names that we want to hold and to give those names significant exposure.

Q: What is your view on risk control?

A: We have a long-only strategy and a transparent and systematic portfolio construction process. Our equal-weight approach explains why we deviate substantially from the index and why we have higher tracking error levels. We don’t have any constraints regarding the tracking error but we focus on keeping the absolute risk and the volatility low. Since 1999 we have maintained an average 15% to 20% discount in terms of volatility versus the market, so the key message of this strategy is the lower volatility.

The risk profile of this product is also very different from the risk profile of a deep value strategy because we tend to avoid cyclical names, which are heavily represented in the value indexes. It is also important to note that we have stocks that are classified by MSCI as growth names, so our growth score is not far away from the growth score of the market. That’s because our process finds not only the undervalued names with historically stable dividends, but also the companies that are able to grow their business in a sustainable way.