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The long-run value of Conservative Equities

The long-run value of Conservative Equities

01-03-2019 | Ricerca
Should low volatility investing just be about minimizing volatility? Since 2006, we have designed our Robeco Conservative Equities strategy to achieve a maximum absolute return per unit of absolute risk, by focusing not just on volatility but also on other proven factors, including value and momentum. In this research note, we dig deeper and investigate the strategy’s drivers of returns over time.
  • Pim  van Vliet, PhD
    Pim
    van Vliet, PhD
    Head of Conservative Equities

Speed read

  • Conservative Equities outperforms minimum-volatility indices in the long run
  • Added value is the highest when value and momentum factors are strong
  • Performance is stable over the business cycle, especially during recessions
More specifically, we analyze the strategy’s long-term returns, in view of the performance of different proven factors over time. We show that the factors’ performance can be linked to the economic cycle and that factors do perform differently in each phase of the cycle. For example, low volatility and high dividend tend to do relatively well during periods of economic contraction. By contrast, quality and momentum tend to do well in periods of economic growth.
Tieniti aggiornato sull'universo quantitativo
Tieniti aggiornato sull'universo quantitativo
Abbonati

Erratic relative performance

Differences in factor exposures explain why the relative performance of the Conservative Equities strategy tends to be erratic over time, even though it generates the highest long-term risk-adjusted returns compared to the market and all major MSCI single-factor indices. For instance, there is a significant chance that Conservative Equities will underperform the MSCI World Minimum Volatility Index on a one-year (31%) or five-year basis (11%).

The Robeco Conservative Equities strategy is successful over a full economic cycle

The past five years have been marked by particularly weak performance by the value factor. In some cases, momentum compensated for this but, conversely, it was often weak when value was strong. The value and momentum tilt of the Robeco Conservative Equities explains why, in more recent times, the strategy has lagged the MSCI World Minimum Volatility Index.

Successful over a full cycle

However, our analysis also shows the Robeco Conservative Equities strategy is successful over a full economic cycle, outperforming both the market and the MSCI World Minimum Volatility Index. The strategy’s enhanced exposure to the value factor helps boost returns during recession and recovery periods, while exposure to the momentum factor is beneficial during periods of above-average economic growth.

Predicting single-factor index performance is even more difficult than predicting economic downturns and recoveries. Therefore, we argue that the Robeco Conservative Equities strategy, with its enhanced exposure to multiple proven factors, it is highly suitable for long-term investors and those who are expecting the best but preparing for the worst.

Disclaimer

Confermo di essere un cliente professionale

Le informazioni e le opinioni contenute in questa sezione del Sito cui sta accedendo sono destinate esclusivamente a Clienti Professionali come definiti dal Regolamento Consob n. 16190 del 29 ottobre 2007 (articolo 26 e Allegato 3) e dalla Direttiva CE n. 2004/39 (Allegato II), e sono concepite ad uso esclusivo di tali categorie di soggetti. Ne è vietata la divulgazione, anche solo parziale.

Al fine di accedere a tale sezione riservata, si prega di confermare di essere un  Cliente Professionale, declinando Robeco qualsivoglia responsabilità in caso di accesso effettuato da una persona che non sia un cliente professionale.

In ogni caso, le informazioni e le opinioni ivi contenute non costituiscono un'offerta o una sollecitazione all'investimento e non costituiscono una raccomandazione o consiglio, anche di carattere fiscale, o un'offerta, finalizzate all'investimento, e non devono in alcun caso essere interpretate come tali.

Prima di  ogni investimento, per una descrizione dettagliata delle caratteristiche, dei rischi e degli oneri connessi, si raccomanda di esaminare il Prospetto, i KIIDs delle classi autorizzate per la commercializzazione in Italia, la relazione annuale o semestrale e lo Statuto, disponibili sul presente Sito o presso i collocatori.
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