•  
• Tweet
•  
•        Print
•  
•         Track Keywords
•  
• 

Benedicte Gravrand, Opalesque Geneva:

A new report warns against the proliferation of investment factors, and recommends using only a handful of them in a smart-beta portfolio.

Research Affiliates, a California-based firm that specialises in in smart beta and asset allocation, published a new piece of research which looks at the proliferation of investment factors.

Factors are persistent drivers of returns. They are divided into two broad categories: macro factors, which explain drivers of returns across several asset classes, and style factors, which explains returns within those asset classes.

"Factor investing, also called smart beta, is rapidly displacing traditional stock picking," the paper says. Indeed, "traditional active management of equity mutual funds has delivered returns persistently below passive benchmarks. In contrast, many factor-based smart beta strategies have persistently outperformed the same capitalization-weighted benchmarks."

There is a vast proliferation of investment factors, the paper says. But one must look closely at this nascent smart beta category. New......................

To view our full article Click here