BlackRock Scientific

Investment Style: Value

BlackRock Scientific is the former Barclays Global Investors Australian funds management business, which BlackRock acquired in 2009.

The investment philosophy used combines traditional investment insights and quantitative techniques. Outperformance is generally expected to be achieved solely through quantitative stock selection, with style and other factors controlled by portfolio optimisation.

BlackRock Scientific's investment process is entirely quantitative and includes analysis of data from a wide variety of external sources. The process involves three steps prior to conducting any trades: research; quantitative modelling (which includes data collection and cleansing); and portfolio construction.

The research process starts with the identification of ideas and seeks to ensure that all of the investment strategy inputs are 'theoretically sound and empirically valid'. There are four streams of quantitative models: earnings expectations; relative value; earnings quality; and market and management signals.

In combination, these measures enable the firm to rank every security on an expected active return (or alpha score) basis each day. Stock rankings are produced separately for each signal. In terms of portfolio construction, BlackRock optimises the portfolio subject to tight risk controls. Portfolios have a large number of small active positions and the portfolio's active risk is focused on stock selection. This particular Australian equities strategy is benchmarked to a value index with the aim of delivering the desired value characteristics.

The team includes portfolio managers, quantitative research analysts, and equities system analysts.