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Diversification over factors

Exposing the portfolio to a variety of factors improves diversification. The aim of diversifying according to underlying factors is to make the portfolio more robust.

Diversification using the factor approach differs from the traditional method of distribution over asset classes such as equities, bonds and private equity, commodities, hedge funds and regions. The latter approach doesn’t provide insight into the underlying factors that determine the return-risk ratio of a portfolio.

Factor investing means that we divide up a portfolio into factors with significant expected risk and/or return differentials. Accordingly, the assets in a factor-based portfolio are distributed over premiums such as low volatility, size, value and momentum.

Quantitative investing
Quantitative investing

We’ve been leading the way in quant investing for over 25 years, turning research into practical solutions.

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Restoring the battered Value factor in equities
Restoring the battered Value factor in equities
The recent dreadful performance of the academic Value equity factor has been a blow for many investors.
20-10-2020 | Visie
Settling the Size matter in equities
Settling the Size matter in equities
The equity Size premium has failed to materialize since its discovery, almost forty years ago.
23-09-2020 | Research
Will Value survive the quant winter?
Will Value survive the quant winter?
The Value factor posted excellent returns over the first decade of the century.
01-09-2020 | Visie
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