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Bhansali on the Benefits of Price Momentum

PIMCO's Vineer Bhansali sees price momentum as a means to enhance portfolio construction as well as hedge against risk.

Shannon Zimmerman: In the fund research group here at Morningstar, we're fundamentally focused, but a lot of us have interest in quantitative analysis, as well. So, I am very excited to talk to you in your capacity as the person who oversees PIMCO's quantitative portfolios.

So, talk a little bit about the inputs that you use there and then sort of drill down if you would on price momentum. My question there is why such a simple strategy? If you look at the Carhart method which is really just 12 months of what's done well and then you back out I think the last of the 12 months' returns and then re-sort, and there are your contenders and you just buy those, the track record over a very lengthy time series is remarkably impressive. Why hasn't such a simple strategy been arbitraged away?