Can somebody pls. confim my understanding. S2000, can you please look into this when you have time.? Thanks.
Based on the below table, is the portfolio manager correct in saying that his portfolio has tilt towards large cap stocks with lower P/E & leverage
Portolio Benchmark Active Exposure
P/E -0.25 -0.35 0.10
Leverage -0.60 -0.40 -0.20
Market Cap 0.5 0.35 0.15
Is it correct to say that since the active exposure of portfolio to P/E is positive (0.10), the manager is not right when he is says they have tilt towards lower PE, since the Portfolio has above average sensitivity to P/E meaning higher P/E will influence the portfolio more than it would for the benchmark.
However, a positive active exposure for market cap implies, above average sensitivity to market cap that is is line with what the manager claims.
So if you want to have a tilt towards a particular factor, you need positive active exposure and coversely if you need want to move away from that particular factor, you need negative active exposure