The Management Team at Los Angeles Capital is committed to the well-being of our clients and employees and prioritizes health and safety above all. During these turbulent times in the markets, we remain focused on our mission of achieving client investment objectives through unique insight, research, technology, and innovation, and are steadfast in our dedication to providing superior client service that you have come to know with Los Angeles Capital.
The Firm’s Dynamic Alpha Stock Selection Model® (the “Model”) is designed to dynamically adjust factor weights based on shifts in investor preferences as a result of changes in market conditions. Our Investment Team is closely monitoring client portfolios amid the current volatility, and continues to thoroughly evaluate how effective the Model is adapting to the changing news and market reaction as a result of the COVID-19 (“coronavirus”) outbreak. The global spread of coronavirus and the significance of its negative impact on economic output has shifted the Model’s preference from value to embrace higher quality, large cap growth stocks with strong balance sheets, which tend to be more resilient during economic slowdowns. While the preference for growth and quality existed before the coronavirus pandemic escalated in the United States and globally in mid-February, the Model has expanded this positioning over the recent month. Our Investment Team has been rigorously monitoring portfolio exposures during this period to ensure that they are in line with the Model’s current outlook, and we believe that our portfolios are positioned to incorporate the continuing dislocation in the markets by the Model’s adaptive nature.
In terms of continuing operations, in response to the coronavirus outbreak, we have taken precautions in the interests of maintaining a safe and healthy environment, including disseminating guidance to all employees warning about the risks associated with the outbreak. As we monitor this evolving situation, we are continuing to utilize contingencies in our Business Continuity Management Plan (“BC Plan”), including remote working models within every department. Critical workflows are structured in a team-oriented manner to mitigate individual personnel risk and are regularly tested in an isolated work environment as part of our BC Plan preparedness exercises. In addition, we currently support four alternate trading locations with identical configurations as the Firm’s trading desk so that the operational aspects of our investment cycle are not disrupted by a required employee relocation. We do not currently envision a scenario where the coronavirus would negatively impact our daily core operations and believe that our preparation for an event such as this has allowed operations to continue without interruption.
We are happy to answer any questions you may have about your portfolio, market insights, our operations, or our BC Plan response as we navigate the equity markets, and we will continue to provide updates as they become available. We hope that all of our colleagues, clients, and partners stay safe and healthy during this trying and uncertain time, and we look forward to resuming our normal activities and engagement with all parties in the future.