Hedged equity, growth stocks and active management are the keys to equity outperformance in 2016, said Brad Neuman, investment analyst at Alger Funds. Neuman said the market is typically in a more mature phase when the Federal Reserve is raising interest rates and macro trends give way to more idiosyncratic, or stock-specific, factors. As a result, Neuman said active stock picking strategies such as hedged equity, which takes advantage of both undervalued and overvalued securities, should perform well. Furthermore, he said market volatility is expected to rise as the Fed embarks on its rate hike strategy, which is makes it a good environment for hedged equity as the asset class typically exhibits lower volatility due to its short exposure. According to Alger, hedged equity has historically beaten the overall market in a rising rate environment.
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