Navigating noises and biases with clarity and confidence

IN THE intricate landscape of global financial markets, human judgment, while often perceived as an asset, can also be an investor’s greatest vulnerability.

Behavioural finance insights increasingly highlight how cognitive biases can lead to suboptimal decision making, even among experienced market participants, especially during market turbulence when investors have been bombarded by news headlines.

This is why Allianz Global Investors (AllianzGI), as a longstanding proponent of systematic investing, has developed a disciplined investment framework targeted to overcome inherent human limitations under its flagship strategy of Best Styles launched in 1999.

Continually being improved by technologies such as artificial intelligence (AI) integration under human guidance of experienced professionals, this strategy has yielded impressive returns during different market cycles, from financial crises to market turmoil amid trade uncertainty.

Best Styles is the best mix of styles

“Best Styles blends five proven investment styles: Value, Momentum, Revisions, Growth, and Quality,” explains Michael Heldmann, deputy chief investment officer of equity and CIO of systematic equity at AllianzGI.

Rather than relying on a single factor, Best Styles blends these five styles to create a diversified, balanced portfolio. This multi-factor approach helps investors navigate volatile markets by capturing different sources of excess return across cycles, while reducing reliance on market timing or style timing, Heldmann adds.

“For investors seeking a core equity allocation, Best Styles offers a disciplined, research-driven solution that adapts to new data and market conditions while maintaining a consistent investment philosophy,” he highlights.

Since launching the Best Style strategy 26 years ago, AllianzGI has been an early adopter of systematic equity investing – a disciplined, data-driven approach that applies financial theory and empirical research to identify long-term drivers of equity returns, notes Heldmann.

“Our approach is grounded in academic insights but refined through decades of proprietary research and real-world experience,” he notes, adding that by consistently applying a structured framework – focused on Value, Momentum, Revisions, Growth and Quality – AllianzGI has built a resilient strategy that adapts to changing markets while staying true to its core principles.

“Best Styles has demonstrated resilience through multiple market cycles – from the dot-com crash to the global financial crisis and the recent on-and-off changes in trade policy,” notes Heldmann, highlighting that its success lies in its consistent application of a diversified style framework, rigorous risk management, and continual innovation.

Consistency pays off during crises. For example, during the 2008 financial crisis, AllianzGI’s Best Styles strategy identified deep value opportunities in European banks, several months ahead of the market rebound in March 2009.

Similarly, in recent months, its broad diversification and disciplined risk management have helped the strategy deliver consistent excess return despite heightened uncertainty surrounding the US trade policy.

“In other words, it paid off during this time to stick to our style mix,” highlights Heldmann.

He adds that AllianzGI has recently enhanced its models with artificial intelligence to better utilise unstructured data.

Central to AllianzGI’s investment philosophy is the Power of Two – a synergistic combination of advanced technology and seasoned human expertise.

While sophisticated algorithms and machine learning models, integral to the evolution of Best Styles, process vast datasets, their development and interpretation are guided by experienced investment professionals.

“This combination ensures efficient data processing complemented by critical judgment to adapt to market nuances,” Heldmann explains.

“For instance, integrating AI techniques like Natural Language Processing (NLP) enhances our models, yet it is our team’s expertise that ensures these tools are applied meaningfully. This balance is pivotal to the ongoing evolution and success of our strategies.”

AllianzGI has been using machine learning techniques since 2007 to complement traditional models, and continued to expand its capabilities, notes Heldmann, adding that NLP is “one exciting area”, which allows the firm to extract insights from unstructured data like earnings call transcripts. These insights feed directly into its portfolio construction.

AllianzGI’s commitment to continual innovation ensures the “Best Styles” approach remains future-ready. “Our strategy evolves through the integration of new data sources, refined factor definitions, and the adoption of cutting-edge technologies like Large Language Models (LLMs),” Heldmann details.

This dynamic balance between philosophical consistency and technological adaptation enables the strategy to remain responsive to rapid shifts in the investment landscape.

Meanwhile, AllianzGI continues to conduct in-depth, in-house research to ensure its insights are both original and actionable. “We prioritise intellectual honesty, only incorporating data and methods that meet our high standards for quality and relevance,” adds Heldmann.

He notes that this rigorous, self-driven research process differentiates AllianzGI’s systematic strategies in a crowded market, allowing it to stay ahead of market trends, refine models continually, and avoid the pitfalls of overfitting or data mining.

Predictability amid noises

AllianzGI’s Best Styles systematic investment approach is exemplified by Allianz Best Styles Global Equity fund, which is engineered to directly counter behavioural pitfalls through its systematic design.

With a 25-year track record and a 5-star Morningstar rating, the fund is built on more than two decades of proprietary research and real-world experience, with a framework designed to adapt to new data and market conditions, notes Kelvin Lam, head of retail and private bank distribution of South-east Asia at AllianzGI.

“For investors looking for a modern, resilient equity allocation, we think it’s a highly compelling solution,” says Lam, adding that the fund offers a systematic, rules-based framework that “removes emotion from decision-making”.

“That brings three core benefits: enhanced diversification across countries, sectors, and styles; disciplined execution without the influence of market noise; and, importantly, a structure that helps reduce common behavioural pitfalls like performance chasing or style timing. These features make the fund a strong long-term core holding,” Lam notes.

He adds that a right investment approach should focus on process over prediction, applying a disciplined, research-driven approach that captures long-term drivers of equity returns, instead of forecasting the next market winner.

Similarly, Heldmann advises investors considering systematic equity to “look beyond factor exposure alone and scrutinise how risk is managed within a systematic strategy”.

“Many multi-factor approaches emphasise merely factors but overlook the importance of risk control,” he notes, adding that the Allianz Best Styles Global Equity fund integrates multiple proven investment styles within a disciplined risk-managed framework, ensuring that no single investment style dominates and that unintended risk exposures are neutralised.

“As markets become increasingly complex and data-driven, we believe systematic strategies will take on a more central role for investors,” notes Lam, highlighting their Best Styles approach has historically delivered Beta close to 1, low tracking error and high information ratio.

This systematic nature of the strategy not only reduces behavioural biases, such as overreacting to market noises, but also ensures consistency and transparency in portfolio construction, Heldmann explains.

“For investors, this means a more stable and predictable investment experience, with reduced reliance on market timing or subjective calls,” Heldmann highlights.

For investors seeking a resilient and well-balanced core equity allocation, Best Styles is a compelling choice that supports their long-term goals with clarity and confidence, says Heldmann.