Federated Hermes says MDT market neutral strategy targets zero beta, positive returns above risk-free rate

Federated Hermes, Inc. Class B

Federated Hermes, Inc. Class B

FHI

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  • Federated Hermes MDT Advisers head Dan Mahr outlined market neutral strategy run since 1997, positioning it as a low-beta allocation designed to deliver returns above risk-free rate.
  • Portfolios target equity beta of zero through long positions in stocks with positive alpha forecasts, paired with short positions in a roughly equal dollar amount of stocks with negative alpha forecasts.
  • Strategy typically holds about 400 names across long and short books, using modest leverage of about 1.6x-1.8x to reach desired exposure.
  • MDT avoids derivatives, relying on cash equities for both long and short exposure.
  • Mahr flagged leverage as key challenge, increasing importance of risk management in difficult market environments.


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