Prudential brokers have a new tool for selecting equity portfolios-based on a program created for various computer investment profiles.
The program, called “Fundamental Choice,” provides reps with a basket of 35 to 40 stocks they can buy according to a client's risk profile. It is currently restricted to brokers who have discretionary permission to trade accounts and who go through a 10-hour-plus training requirement.
Stocks are selected based on the firm's fundamental and quantitative research. Only stocks with ‘buy’ ratings are considered. Those names are then sifted through the quantitative model to find those most appropriate for clients in moderate, moderately aggressive or aggressive portfolios.
“It's a good time to get away from the ‘When's the market turning around?’ story and address what we currently have, and at the same time, let's come up with a strategy for moving forward,” says Bubba Bennett, director of portfolio management programs at Pru.
Sell signals are triggered if the fundamental rating drops to sell, or the quantitative rating drops to the bottom two quintiles. Participants must choose a minimum of 10 stocks per client, and they must sell stocks within 21 days after a sell signal, and cannot over-concentrate in any sector or equity name.
Currently, Fundamental Choice doesn't have an overlay that takes into account the individual's tax situation, although Bennett says that's “on the drawing board.” In addition, the firm is developing portfolios for more conservative investors, those with mostly fixed income and cash. Bennett also says that as the research department expands, the plans are to eventually offer a basket of 60 to 70 stocks.
