Merrill Lynch Investment Managers (MLIM) has developed a framework to assist in its global sector in...
Merrill Lynch Investment Managers (MLIM) has developed a framework to assist in its global sector investment decisions.
Global Sector Analysis (GSA), which has been rolled out over the past month, is the brainchild of Richard Turnill, group chief economist, Ewen Cameron Watt, global head of investment strategy and research, and Ken Liow, director of investment solutions and quantitative analytics.
Cameron Watt said: 'It is increasingly apparent that sectors are an important feature of investment performance. We were told by clients that there was no definite feeling of how to measure this, which is why we have developed GSA.'
GSA takes account of the economic cycle and its effect on investing. Using a 'sector clock', MLIM has compared sector performance with economic data over the past 20 years to establish which sectors performed well in which cycle.
The system also investigates the correlation between the performance of global sectors and the way different sectors move in relation to each other.
An example cited by Cameron Watt is the manner in which utilities and consumer staples move together but utilities and technology tend to move in opposite directions.
'A number of other key variables are factored in,' he said, 'such as inflation, the yield curve and the cost of crude oil.
'These build up a matrix of which sectors are likely to be affected by changes in different variables. The matrix incorporates valuation measures for the 10 main global sectors, compared to their own history and to the market in aggregate.'
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