ESG Investing: Too Good To Be True?

Good versus Bad Corporates This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q3 hedge fund letters, conference, scoops etc SUMMARYESG factors generated positive excess returns since 2009 Show positive exposure to Low Volatility & Quality and negative exposure to Value & Size Factor exposure is likely [...]

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An Anatomy Of Smart Beta Value ETFs

Can Value Investors Capture Factor Returns via Smart Beta? Q3 hedge fund letters, conference, scoops etc SUMMARYSmart beta Value ETFs are relatively homogenous Some show high exposures to other equity factors, which may represent risk Excess returns from smart beta are significantly lower than long-short factor returnsINTRODUCTION The last ten years can be viewed [...]

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Factor Investing Made In China

Harvesting Factor Returns in the Middle Kingdom This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. Q3 hedge fund letters, conference, scoops etc SUMMARYCommon equity factors generated attractive risk-adjusted returns in the Chinese stock market Factor performance in China often mirrors global factor performance Indicates common factor [...]

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Factor Optimization

Pure versus Dirty Factors SUMMARYEquity factors exhibit sector biases and exposures to other common factors A factor optimisation process allows investors to create pure factors Risk-adjusted returns do not increase, but pure factors are attractive from analytical, risk and allocation perspectivesQ3 hedge fund letters, conference, scoops etc INTRODUCTION When large quantities of organisms like zooplankton [...]

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Private Equity: The Emperor Has No Clothes

This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q3 hedge fund letters, conference, scoops etc SUMMARYPrivate equity returns can be replicated with small cap equities Small, cheap and levered stocks would have achieved higher returns since 1988 Valuation and debt multiples are at all-time-highs, lowering [...]

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Tactical Statistical Arbitrage

SUMMARYStatistical arbitrage behaves similarly across markets Volatility is the main performance driver Attractive strategy for diversifying an equity portfolioQ3 hedge fund letters, conference, scoops etc INTRODUCTION Strategies like Value or Momentum are like staples that deserve a permanent allocation in investors portfolios. In contrast, other strategies are more like sunscreen, which is mainly used [...]

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Equity Factors: Reducing Portfolio Turnover

SUMMARYPortfolio turnover of equity factors can be reduced significantly by trading more conservatively However, reducing turnover does not necessarily increase risk-return ratios It all depends on transaction costsQ3 hedge fund letters, conference, scoops etc INTRODUCTION Turnover in business tends to be positive or negative, depending on the context. Investors prefer businesses with high turnover [...]

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The Dark Side Of Low-Volatility Stocks

Long Bonds? This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q3 hedge fund letters, conference, scoops etc SUMMARYLow-volatility stocks have outperformed the market over the last 25 years The strategy has reduced equity drawdowns in the US, Europe, and Japan significantly However, low-volatility stocks have partially [...]

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Statistical Arbitrage In The US

Arbitraged Away? Q3 hedge fund letters, conference, scoops etc SUMMARYStatistical arbitrage has attractive strategy characteristics However, the returns are highly dependent on transaction costs Best used as a tactical strategy when volatility is highINTRODUCTION Equity markets in 2018 can be characterized by divergence. There is the US, showing strong returns, versus most other developed and [...]

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Improving The Odds Of Value

Tactical versus Strategic Allocations to Value SUMMARYValue investors earn a premium for holding undesirable stocks Market skewness may identify periods where the premium is more attractive The returns from the Value factor since 1926 were zero when market skewness was negativeQ3 hedge fund letters, conference, scoops etc INTRODUCTION Although buying cheap stocks is intuitively [...]

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Factor Investing In Micro & Small Caps

Treasure Hunting in the Wild West of Equity Markets This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link.Get The Full Warren Buffett Series in PDF Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your [...]

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Liquid Alternatives: Alternative Enough?

This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link.Get Our Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to [...]

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Factor Olympics Q3 2018

And the Winner is…Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. [...]

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Short-Term Momentum In Equity Factors

SummaryShort-term momentum persists in common equity factors The persistence is strong in Value and Dividend Yield However, these results conflict with short-term mean-reversion on equity index levelGet Our Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it [...]

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Volatility, Dispersion & Correlation – Friends Or Foes?

SUMMARYHigher volatility & dispersion imply higher stock market risks The relationship between correlation and risk is not linear However, these market technicals do not behave consistently across timeGet The Full Seth Klarman Series in PDF Get the entire 10-part series on Seth Klarman in PDF. Save it to your desktop, read it [...]

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Chasing Mutual Fund Performance

This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. [REITs] Q2 hedge fund letters, conference, scoops etc SUMMARYMutual funds exhibit momentum when measured by their one-year performance Momentum disappears when more reasonable fund selection criteria are applied Performance does not seem effective for fund selection for a [...]

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Factor Momentum

SUMMARYThe Momentum strategy can be applied to stocks, sectors, countries and factors Factor momentum shows positive excess returns across regions However, single-stock Momentum performance is comparable and less complex to implementGet The Timeless Reading eBook in PDF Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, [...]

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How Crowded Are Technology Stocks?

This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link.Get The Timeless Reading eBook in PDF Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. [...]

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Factors: Shorting Stocks vs The Index

Do Short Stock Positions Contribute to Factor Returns?Get Our Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below! [...]

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Impact Of Single Stocks On Factor Returns

Do Single Stocks Matter for Factor Investors? SUMMARYFactor portfolios are typically created by equal weighting stocks The impact of single stocks is therefore reduced compared to market-cap weighted indices The FAANG stocks impacted factors differentlyGet The Timeless Reading eBook in PDF Get the entire 10-part series on Timeless Reading in PDF. Save it [...]

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Factor Crowding Model: Mob Management Measures

SUMMARYCrowded factors exhibit higher drawdowns than uncrowded factors A multi-metric approach can be successfully applied to measure factor crowding Effective in reducing factor drawdowns and volatility, but less meaningful for returnsGet The Timeless Reading eBook in PDF Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, [...]

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