Global investing isn’t new to Boston Partners, nor is long/short equity investing, and a recent white paper from the firm explains the benefits of combining the two in a single strategy. As one of the early pioneers in the long/short equity mutual fund space, Boston Partners has staked out a name for itself in the category with the launch of its third long/short equity mutual fund in December of last year.
The firm’s first long/short equity fund, the Robeco Boston Partners Long/Short Equity Fund (BPLSX) launched in 1998 and closed to new investors in 2010, twelve years after launching. Their second fund, the Robeco Boston Partners Long/Short Research Fund (BPIRX), was launched in 2010 and closed to new investors earlier this year. Its most recent fund, the Robeco Boston Partners Global Long/Short Fund (BGLSX), leverages the notion of expanding the opportunity set for long/short equity investing to the global equity market.
As Boston Partners outlines in their white paper titled “A Global Approach to Long/Short Investing,” the opportunity set is greater as the investment universe is expanded beyond the borders of the U.S. In the chart below, they show the rolling 1-year historical performance spread between the best performing groups of stocks (top 3 deciles) and worst performing group of stocks (bottom three deciles.) Clearly the performance spread of the global stock universe (solid blue line) is greater than that of the domestic universe (solid green line), along with the global average being about 5% higher.
A general rule in investing is that greater breadth creates more opportunity. This is clearly seen in the example provided by Boston Partners. However, breadth alone isn’t a solution for greater alpha. The firm notes that too much information can overwhelm investors. It is the ability to transform this information into meaningful knowledge that allows an asset manager to separate the good investments from the bad.