The Merits of a Sector-Specialist, Sector-Neutral Investing Strategy

Perhaps the primary concern faced by asset managers, investors, and advisors is the need to focus portfolio risk where more skill has been demonstrated, while reducing or eliminating risk where there has been less skill proven. Surprisingly, limited research has been done on this topic, even though the issue is critically important to both institutional and individual investors who seek to find portfolio managers who can not only outperform their benchmarks, but also do so on a consistent basis over long horizons. A sector-specialist, sector-neutral approach is one portfolio construction model that focuses active risk on the stockpicking ability of sector-specialist managers to help investors achieve their desired performance outcomes.