Scientific Beta offers portfolio solution to institutional investors

Index solutions provider Scientific Beta said 'completion portfolios' can be used by institutional investors to address unintended alignments in their portfolio positioning.

Scientific Beta's research showed that even the most meticulously designed portfolios are not immune to the creep of unintended exposures over time.

The firm said completion strategies address this by using targeted instruments that help realign overall exposures with strategic investment goals.

It added that rather than seeking to replace institutional investors' existing investments, completion portfolios complement their core holdings to achieve more precise positioning.

"The fundamental value of completion portfolios lies in their ability to bridge the gap between strategic intent and actual portfolio composition," the research said.

"Completion is not a replacement mechanism-it's a precision tool."

Scientific Beta said the need to bridge portfolio imbalances has been highlighted in recent times as US growth stocks, led by the so-called 'Magnificent Seven', have dramatically outperformed value stocks, which has resulted in many market cap-weighted portfolios developing unintended growth tilts.

It also cited that regional imbalances have arisen in multi-manager global equity portfolios as by-products of manager specialisation. Meanwhile, it said Australian asset owners also face challenges in integrating multiple objectives in sustainability portfolios.

"Completion portfolios represent a solution to the persistent challenge of portfolio management: ensuring that investment allocations consistently reflect an investor's core objective," the research said.