Richard Bernstein, CEO and CIO of Richard Bernstein Advisors, joined Keith Black, Managing Director of RIA Channel, to discuss the influence of profit cycles on the returns to equity sectors.
Richard Bernstein Advisors offers mutual funds and SMAs that express macro views. As an active manager, the firm seeks to drive returns by exposures to factors such as size, style, industry, sector, and geography rather than through opinions on individual stocks. RBA’s mutual funds implement these views using baskets of stocks, while the SMAs use ETFs to express the macro views.
The proliferation of both equity and fixed income ETFs allows more choice and precision in expressing the firm’s macro views. Rather than buying ETFs based on the name of the fund, RBA x-rays all ETFs to ensure that the holdings of each fund accurately expresses the firm’s view on future factor returns.
Bernstein explains that the returns to rotation across sectors, styles, and segments follow the profit cycle, not the macroeconomic cycle of GDP growth. Advisors can use RBA’s offerings as core equity or fixed income holdings or use the long-only funds to take exposures similar to those of a macro hedge fund, but with greater liquidity and lower fees.
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