When constructing a portfolio, Goldman Sachs seeks to diversify away from the core market-cap risk through a factor-based risk-budgeting approach. They aim to achieve this by targeting risk factors which they have identified as having strong historical statistical significance in generating returns, are lowly correlated to one another, and have a fundamental justification for the excess risk-adjusted returns they have exhibited. As a result, they may seek exposure to a range of different strategies and asset classes including traditional equities, bonds, currencies and commodities, but also non-traditional asset classes (if permitted by client guidelines) such as momentum strategies across asset classes, volatility selling, interest rate premia, carry as well as active risk from tactical asset allocation and security selection. As markets evolve and the investment landscape changes, Goldman Sachs works with their clients to adjust or tilt their portfolios in a way which they believe will benefit them over the long term. |
