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Robeco has introduced a new version of the Enhanced Indexing fund for developed markets, which has been tax-optimized for Dutch retail investors. Enhanced Indexing, which has an excellent 12-year track record of over 1% outperformance per year at a tracking error of around 1%, offers a credible alternative to passive investing.
Nobel prize laureate Eugene Fama (pictured) and fellow researcher Kenneth French have revamped their famous 3-factor model by adding two new factors to analyze stock returns: Profitability and Investment. But this 5-factor model raises many questions.
Recently a new factor was added to the literature: Quality. In credits, we see Quality as a natural extension of pure Low-Risk. All our credit factor models have used Quality since inception, and have expanded its use over the years.
Investors are worried about the high valuations of stocks in general and low-volatility stocks in particular. And so are we! In relative terms, low-volatility stocks have become more expensive during the last two years, but it’s not the first time. It happened first in 2008 and again in 2011.
Smart beta indices are a popular way of implementing a factor investing strategy. However, research suggests that this may not the best way, as the factor exposure provided by popular smart beta strategies varies greatly and they do not unlock the full potential of factor premiums.