Factor Investing: Avoiding the pitfalls

What Is Your General Experience Of Factor Investing?

Our experience is that factor investing can be a highly successful strategy but that it needs to be approached with realistic expectations and certain pitfalls need to be avoided. This is why, although our strategies have generated significant value for our clients, we are constantly refining our approach with a view to improving performance stability.

What Do You Mean By “Realistic Expectations”?

Investors should be aware that factor investing principally deals with publicly available information. This being the case, however sophisticated your information processing may be, there is a limit to how much absolute outperformance you can generate in a given portfolio. In addition, we believe factor investing – at least if it is done well – requires significant diversification, which naturally limits the absolute alpha that can be generated.

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