LSV Asset Management specializes in value equity management for institutional investors around the world. LSV currently manages approximately $97 billion in value equity portfolios for approximately 350 clients as of January 1, 2017.
Formed in 1994, LSV Asset Management (LSV) is a quantitative value equity manager providing active management for institutional investors through the application of proprietary investment models.
LSV has academic roots and was named after our founding partners:
- Josef Lakonishok, Ph.D. (Former William G. Karnes Professor of Finance at the University of Illinois at Urbana-Champaign)
- Andrei Shleifer, Ph.D. (Professor of Economics at Harvard University)
- Robert Vishny, Ph.D. (Former Eric J. Gleacher Distinguished Service Professor of Finance and now Myron S. Scholes Distinguished Service Professor of Finance at the University of Chicago, Booth School of Business)
Our founders are well known for their work in behavioral finance. Over 30 years of academic research and over 200 research papers, many of which have been published in Financial Journals, are the foundation for LSV’s disciplined investment strategy. Josef Lakonishok remains the active leader of LSV while Rob Vishny and Andrei Shleifer have retired from the firm and are active in their academic work. The firm has evolved since its formation in 1994 when there were three owners and a venture capitalist (SEI). Today, there are twenty nine equity partners whom are actively involved in the business. The current and former employees own a majority of the firm’s equity.
The fundamental premise on which our investment philosophy is based is that superior long-term results can be achieved by systematically exploiting the judgmental biases and behavioral weaknesses that influence the decisions of many investors. These include: the tendency to extrapolate the past too far into the future, to wrongly equate a good company with a good investment irrespective of price, to ignore statistical evidence and to develop a “mindset” about a company.
LSV uses a quantitative investment model to choose out-of-favor (undervalued) stocks in the marketplace at the time of purchase that have potential for near-term appreciation. LSV believes that these out-of-favor securities will produce superior future returns if their future growth exceeds the market’s low expectations.
LSV portfolios typically have a deep value orientation relative to the indices. Market timing is not part of the process and portfolios are fully invested (cash levels usually below 2%).
LSV uses quantitative techniques to select individual securities in what would be considered a bottom-up approach. The investment process is similar for each of our investment strategies but is segmented into different capitalization ranges or regions.
A proprietary investment model is used to rank a universe of stocks based on a variety of factors we believe to be predictive of future stock returns. The process is continuously refined and enhanced by our investment team although the basic philosophy has never changed – a combination of value and momentum factors. We then overlay strict risk controls that limit the over- or under-exposure of the portfolio to industry and sector concentrations. We also limit exposures in individual securities to ensure the portfolios are broadly diversified, further controlling risk.
The competitive strength of this strategy is that it avoids introducing the process to any judgmental biases and behavioral weaknesses that often influence investment decisions.
Portfolio turnover is approximately 30% for each strategy.
LSV has a strict policy against using soft dollars. Socially Responsible Investing (SRI) screens are available.