Public Equity

GICS Changes: Introduction of the Communication Services Sector

October 2018
On September 28th the Global Industry Classification Standard (“GICS”) underwent a major structural change. The result of the change is the broadening and renaming of the Telecommunication Services sector, which is now known as Communication Services. The change is meant to acknowledge that the way people communicate, share information and entertain themselves has fundamentally changed, as a result of the convergence of technology, media and telecom. Our Rocaton Insights: GICS Changes: Introduction of the Communication Services Sector provides additional detail on this change and outlines potential implications for public equity portfolios.
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The Case for Midstream Energy Equities

May 2018

MLPs (as well as other midstream companies structured as C-Corps), own, maintain and operate most of the energy infrastructure in North America. As oil prices declined sharply between late 2014 and early 2016, MLP and midstream equity prices also fell meaningfully. Despite a recent recovery in oil prices, the midstream energy sector has continued to fall. The linked Insights provides an overview of the midstream energy space, presents the case for making a near-term allocation, discusses potential risks and covers the potential implementation options for different investor types.


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Rocaton’s Public Equity Investment Philosophy

February 2018

In a market environment characterized by richer valuations and lower yields, investors may feel the propensity to shift to riskier investments to generate higher returns. Rocaton believes that a well-structured public equity program has played and will continue to play an important role in the ability to meet longer-term objectives. In this edition of Insights, we outline our long-standing public equity investment philosophy, predicated on prudent use of active risk. Above all, Rocaton remains focused on creating customized solutions across our client base and we welcome more targeted discussions on how best to adapt our equity investment philosophy to your specific program.


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An Exploration of China A-Shares

June 2017
To date, institutional investors have been able to access only part of the Chinese equity market through “H-shares”, mainland companies that are traded in Hong Kong. China A-shares, local-currency shares traded on the domestic exchanges in China, are not included in the MSCI Emerging Markets Index and are largely restricted from foreign investment. Given our support of emerging market equities as a component of many investment programs, coupled with China’s increasing importance in the global investment landscape, Rocaton believes it makes sense to study the China A-share market in more detail.

This Insights explores the rationale for; the accessibility of; and the risks of investment in China A-share companies. While we do not offer an opinion on the absolute or relative attractiveness of China as a country, here as elsewhere we do encourage the most robust alpha opportunity set in equities for active investment managers. Rocaton’s view is that active emerging market equity managers should fully consider the China A-share opportunity set for client portfolios, as they would any other region.


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Low Volatility Equity Investing

May 2016
Low volatility equity investing, sometimes considered among the “smart beta” strategies, has garnered a lot of attention and interest in the investment community since the financial crisis of 2008-2009. Low volatility investing is an investment approach with broad applications. Many investors have been searching for ways to reduce the overall volatility of their entire portfolio without sacrificing returns. Low volatility strategies are constructed in order to achieve those goals with the additional benefit of lower fees than traditional active management. Investment managers are able to attain an attractive risk/return profile due to the low volatility anomaly that exists in the stock market. This paper will provide insight into the low volatility anomaly, objectives, expectations, and client fit of low volatility strategies.


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Emerging Markets: Compelling Long-Term Value or Value Trap?

November 2015
During a strong bull market in which nearly all asset classes have risen in price, there has been one noticeable outlier: emerging markets. Following the global financial crisis, emerging markets appeared to be an attractive investment as these countries were, by many measures, in better fiscal health relative to the developed world. However, the experience for investors allocating to emerging markets, particularly equities and local currency debt, has been anything but satisfying. Emerging market asset classes, primarily equities and local currency debt, have declined significantly in 2015 and have struggled to keep pace with developed market assets for much of the last five years. There are significant risks and opportunities in emerging markets resulting in the potential for a wide range of outcomes.


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Equity Market Valuations: A Review of CAPE Ratios

August 2015
There is no perfect measure for assessing the value of public equity markets, but the price-to-earnings ratio is both logical and certainly one of the most popular metrics. Rocaton prefers to use cyclically adjusted price-to-earnings (“CAPE”) ratios, sometimes referred to as normalized P/E ratios or the Shiller P/E ratio. While we don’t expect CAPE ratios to have perfect predictive power, the measure has proven to be reliable over longer time periods. In this Rocaton Insights, we review the predictability of CAPE ratios, address some of the criticisms of CAPE ratios, and examine where current equity market valuations are today.


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Misery had Plenty of Company: Active Equity Manager Performance in 2014

October 2014
In this Rocaton Insights, we discuss the widespread relative underperformance of active equity managers during the first half of 2014.


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