AB Low Volatility Equity Portfolio

We are delighted to be marking the 10-year anniversary of the AB Low Volatility Equity Portfolio. and the current uncertain environment is a fitting reminder of why we launched the strategy. beating the benchmark is simply not enough.  The pattern of returns is just as essential to our clients’ long-term investment success.

Most importantly, that means mitigating risk during down markets. Capturing most of the upside and cushioning the blow in downturns enables investors to stay invested and recover faster in a rebound, in our opinion.

It is an active equity portfolio, with 70 - 90 stocks, employing extensive fundamental research to select stocks and remaining fully invested at all times.

It is our conviction that thorough analysis of a companies’ business sustainability leads to a well-diversified portfolio well positioned to create a lasting edge.

We focus on absolute risk and return, not the benchmark.

We focus on quality and stability to provide downside mitigation, and on valuation to help avoid pockets of the market that may be expensive and vulnerable to corrections.

The investor profile for this type of portfolio is based on the client need for long term capital growth with less risk than the overall equity market.

Equities remain a vital source of long-term returns even in economically challenging periods with heightened market volatility, such as at present.

One thing is certain: it is extremely difficult to time market inflection points, and investors who try to do so often end up hurting themselves. Following the recent declines, current valuations point to improved long-term return potential going forward.

Sector and regional views are a by-product of our bottom-up stock selection process.

Essentially, we believe investors should broaden their sources of volatility mitigation. Companies that we call quality compounders have successful business models and sustainable earnings, backed by good capital stewardship and positive ESG behavior.

These attributes support compounding earnings gains through market cycles.

In our view, investors would be well-served paying heed to potential catalysts for continued market volatility—ongoing inflation, rising interest rates and a maturing information technology sector.

We believe that the three pillars of quality, stability, and price are key to mitigating the risks that you see in the marketplace today. Firstly, we believe you should counter inflation with quality. These companies  tend to offer strong pricing power and consistent profitability.

Secondly, we you should offset slowing growth and earnings risk with stability. Stable companies can cushion on the downside because they are typically less sensitive to the broader market than traditional growth firms. Such firms like are often seen in traditional defensive sectors such as healthcare, utilities and consumer staples, but can also be found in less-defensive sectors like technology, financials (despite the current turmoil) and energy.

And finally, we believe you need price discipline because you need to mitigate that interest rate risk by investing in companies that are less susceptible to rising interest rates.