Factor Investing On Country Level

Away with Stocks? Q2 hedge fund letters, conference, scoops etc SUMMARY Investors can harvest returns from common equity factors on country level Returns are consistent when combined into a multi-factor portfolio Performance of some factors is comparable to those on single stock level, indicating common drivers INTRODUCTION Factor investing strategies like Value are relatively easy to [...]

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Quant Strategies: Theory vs Reality

Can Returns Seen in Research Be Achieved? Q2 hedge fund letters, conference, scoops etc This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. SUMMARY The live performance of quant strategies is significantly worse than in backtesting Factor investing returns from research are frequently challenged as being overstated However, the performance of [...]

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Mapping My Mind: Value Factor

What have I learned so far? Q1 hedge fund letters, conference, scoops etc SUMMARY There is consistency in the performance of the Value factor across markets and asset classes Allows to create a coherent framework of how to think about Value Suggests a global driver of factor performance INTRODUCTION Our research aims to educate investors by [...]

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Factor Olympics 1H 2019

And the Winner is... Q1 hedge fund letters, conference, scoops etc Summary Most factors generated positive returns in 1H 2019 Low Volatility produced the best and Value the worst performance Factor performance is comparable in the US & Europe, but markedly different in Japan Introduction We present the performance of five well-known factors on an annual basis for [...]

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The Case Against Small Caps

Testing Alternative Metrics to Market Capitalization Q1 hedge fund letters, conference, scoops etc This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. SUMMARY The performance of the Size factor in the US was positive since 1926, but not particularly attractive Returns in Europe were more favorable, but not in [...]

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How To Allocate Smartly To Smart Beta

Takeaway versus Home-Cooked Investing Q1 hedge fund letters, conference, scoops etc This research note was originally published in the Beyond Beta magazine from ETF Stream. Here is the link. Summary Single factor excess returns are attractive over the long-term, less in the short-term Comparing popular asset allocation models does not highlight one superior methodology Multi-factor portfolios [...]

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Cheap Versus Expensive Countries

Value on Country Level Q1 hedge fund letters, conference, scoops etc SUMMARY A global value portfolio on country level features structural country biases Returns were positive since 1990, but lacked consistency Value on country and single stock level exhibit the same trends, highlighting common performance drivers INTRODUCTION Holding Value stocks is emotionally challenging as cheap valuations [...]

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Improving The Momentum Factor

Summary The performance of the Momentum factor in the US has been poor since 2000 Fundamental valuation spreads were ineffective for improving the performance Combinations with other factors and factor volatility filters would have yielded better results Q1 hedge fund letters, conference, scoops etc Introduction John H. Cochrane of the Hoover Institution at Stanford University [...]

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Option-Based Strategies: Opt In Or Opt Out?

Harvesting Fear and Greed This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q1 hedge fund letters, conference, scoops etc SUMMARY Option-based strategies generated better risk-adjusted returns than the S&P 500 over the last 30 years Investors should be wary of buying options and focus on [...]

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Replicating Famous Hedge Funds

Do Hedge Funds Generate Alpha or Simply Provide Factor Exposure? Q1 hedge fund letters, conference, scoops etc This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. SUMMARY Diverse hedge fund strategies can be replicated via factor-mimicking portfolios The analysis highlights that most returns are explained by factors, not alpha However, hedge [...]

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Warren Buffett: The Greatest Factor Investor Of All Time?

How Much Alpha Did Warren Buffett Generate? Q1 hedge fund letters, conference, scoops etc This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Summary A factor exposure of Berkshire Hathaway reveals structural factor tilts Long Value, Size, Quality, and Low Volatility factors and short Growth and [...]

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Multi-Factor Smart Beta ETFs

A Recipe Only As Good As Its Ingredients This research note was originally published by Investments & Pensions Europe (IPE). Here is the link. Q4 hedge fund letters, conference, scoops etc mohamed_hassan / Pixabay Summary Investors have leaned towards multi-factor over single-factor products in recent years The factor selection and portfolio construction of multi-factor ETFs [...]

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Factor Olympics Q1 2019

And the Winner is... Q4 hedge fund letters, conference, scoops etc Summary 2019 has started favorable for factor investors, compared to 2018 Low Volatility generated the best and Value the worst performance Factor performance is comparable in the US & Europe, but different in Japan Introduction We present the performance of five well-known factors on an annual basis [...]

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Black Swans, Major Events & Factor Returns

How to Prepare For the Unexpected? This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. Q4 hedge fund letters, conference, scoops etc Skitterphoto / Pixabay SUMMARY It is questionable if investors should prepare for catastrophic events Factor returns are almost random after black swan and major events Simple diversification is likely the [...]

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GARP Investing: Golden Or Garbage?

Cheap Growth Stocks – Too Good to Be True? This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q4 hedge fund letters, conference, scoops etc rawpixel / Pixabay SUMMARY GARP aims to combine Growth and Value investing GARP stocks have outperformed the market since 1989 It is somewhat [...]

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Factor Investing In Financials, REITs & MLPs

Do Unique Sectors Offer Attractive Alpha Opportunities? Q4 hedge fund letters, conference, scoops etc SUMMARY Beating benchmarks is challenging for fund managers, even in unique sectors Factor performance in financials, REITs, and MLPs is comparable to the cross-sector factor returns Classic factor investing strategies are likely more attractive than industry expertise INTRODUCTION Stating that active managers have [...]

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Can Value Investors Do Good?

Combining ESG and Value Investing Summary ESG factors underperformed the Value factor and market since 2009 Integrating ESG in Value investing decreased returns, but increased risk-return ratios Residual ESG factors are likely to generate negative returns given the focus on stakeholders, not shareholders Introduction Value investors frequently comment on how challenging the strategy has been [...]

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Smart Beta: Broken By Design?

Investors Can’t Have Their Cake and Eat It Too This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q4 hedge fund letters, conference, scoops etc SUMMARY Smart beta excess returns are different from factor returns The Low Volatility factor shows the highest discrepancy between theoretical and realized [...]

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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 SUMMARY ESG 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 SUMMARY Smart 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 returns INTRODUCTION 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 SUMMARY Common 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 SUMMARY Equity 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 perspectives Q3 hedge fund letters, conference, scoops etc INTRODUCTION When large quantities of organisms like zooplankton [...]

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