Benefit of factor investing across asset classes
Diversifying is often quoted as being the only free lunch investors have and a necessity to create robust portfolios that meet long term targets. Investors therefore tend to allocate to a broad set of asset classes including high yield, private equity and hedge funds. During the financial crisis of 2008 these seemingly well balanced portfolios turned out to be not as robust and diversified as hoped. Knowing this and given the low yields and near record high equity markets, investors could end up in deep waters. What to do now? We believe it is the time to allocate to factors over different asset classes as a main building block in portfolios, as it not only offers attractive returns but also provides the diversification investors need.
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