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Friday, April 25, 2014

GSAM's Quant Chief Reveals Plans for Westpeak

Reported by Tommy Fernandez

It would seem almost counter-intuitive, an asset manager with a well-defined presence in liquid alternatives acquiring a smart-beta shop.

But that's exactly what Goldman Sachs Asset Management did earlier this week, purchase "ActiveEbta" specialist Westpeak.

Now, what are they going to do with it?

Well, Armen Avanessians, head of quantitative strategies at GSAM, gave MFWire some insights on the acquisition and GSAMs plans.

For example, these are the reasons Avanessians gave for the acquisition:

Smart beta is one of the fastest growing areas within the equity asset class, combining the transparency of passive investing with the potential value-add from active strategies. Westpeak’s comprehensive and customizable framework for factor-based smart beta investing will enable us to discuss potential solutions for a client’s overall equity portfolio. This kind of portfolio construction conversation has been valuable for GSAM’s clients in other asset classes, and we believe it will provide the same opportunity now in equities. We believe that through the identification and implementation of investment factors (e.g., value, momentum), investors have the opportunity to achieve a more efficient capture of the broad market. We also believe that Westpeak’s proprietary ActiveBeta Strategies can enhance client returns relative to more common factor-based portfolios.

This acquisition reinforces GSAM’s focus on investment innovations across global equity markets, and in helping provide clients the opportunity to tailor their equity exposure to investment factors in a unique and customized approach. Westpeak’s proprietary ActiveBeta Strategies complement well GSAM’s existing capabilities in the beta space, which includes liquid alternatives, rules-based, and tax-efficient strategies.

The combination of these capabilities, inclusive of Westpeak’s proprietary factor-based equity solutions, form our new Advanced Beta Strategies platform, which we believe is critical to our engagement with our clients. Our most sophisticated clients are interested in customized investment solutions that allow them to tailor their exposures to markets in a smart, efficient and scalable way. This acquisition reinforces GSAM’s commitment to being an industry leader in the Advanced Beta space, further enhancing our ability to help our clients. We believe that Advanced Beta will be among the most prominent trends to emerge in the asset management industry over the next decade.

Avanessians said that after they join GSAM, the former Westpeak team members will be fully integrated into the broader GSAM Advanced Beta Strategies organization.

"We expect that team members will travel frequently between the New York and Boulder locations," he said.

He said that "GSAM provides investment solutions across global equity markets and Westpeak is a good complement by specializing in the capture of factor returns through its ActiveBeta Strategies."

With the ActiveBeta strategies, Avanessian said, investors will be able to customize the capture of individual and diversified factor returns at desired levels of target tracking error (i.e., customize risk tolerance); create customized factor diversification strategies to reflect their philosophical biases (i.e., customize beliefs), and develop customized solutions to help them better manage portfolio exposures and design completion strategies (i.e., customize exposure risk).  

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