japanja
Achieving your investment goals with factors: enhance returns

Achieving your investment goals with factors: enhance returns

28-05-2018 | インサイト

Factor-based strategies can enhance returns over the longer term. Second article of a series on how factors can help investors achieve specific goals.

Speed read

  • Systematic exposure to factors is a cost-efficient way to enhance returns
  • Factor investing offers a halfway house between active and passive
  • Investors should make sure they implement well-designed strategies

The context

One of the most important transformations experienced in recent years by the financial industry has been the massive shift from active to passive investment strategies. Decades of frequently disappointing active manager performance and increasing cost awareness have pushed many investors towards low-cost indexed strategies, often through the use of ETFs.

But this shift raises a number of concerns. For instance, going passive may be cheap and prevent unpleasant surprises from wrong active calls, but it also leads to chronic underperformance, once costs are taken into account. Moreover, passive strategies expose to significant arbitrage risk.

In this context, many investors have turned to factor investing in a bid to achieve superior risk-adjusted returns while keeping costs relatively low. In fact, a 2017 FTSE Russell survey of asset owners found that return enhancement ranked second among the top investment goals that lead them to consider factor-based strategies.

クオンツに関する最新の「インサイト」を読む
クオンツに関する最新の「インサイト」を読む
配信登録

Scientific grounding

Factor investing has its roots in the vast body of empirical evidence that has been accumulated over more than four decades and documents the existence of various factor premiums in financial markets. These premiums can be systematically harvested to enhance the risk-return profile of a portfolio.

Factors can be associated with different characteristics of a financial security – such as its valuation, or its price momentum and volatility – that are important determinants of its long-term risk and return. Securities featuring certain factor characteristics have shown to have higher risk-adjusted returns than the market portfolio over the longer term (see Figure 1).

Figure 1: Historical performance of generic factors for equities

Source: David Blitz, “Factor Investing Revisited”, Journal of Index Investing, 2015. Performance figures for generic U.S. value-weighted factor portfolios from 1963:07 to 2014:12. Quality is defined as the equal weighted combination of the Profitability and Investment factor portfolios.

Despite its deep academic rooting, the real breakthrough in factor investing did not come until 2009 and the publication of a research report1 by professors Andrew Ang, William Goetzmann, and Stephen Schaefer. Analyzing the performance of one of the world’s largest sovereign wealth funds, which invests Norwegian oil revenues, the three academics showed that rather than reflecting true skill, the added value of the fund’s active management could in fact be explained by implicit exposures to systematic factors.

The authors also advocated the adoption of factor investing because of the long investment horizons of factor premiums. From that moment, the concept rapidly gained popularity among professional investors around the world who were faced with similar issues and sought an efficient and prudent way to systematically capture factor premiums.

Additional considerations

Implementing factor investing is not a binary “yes” or “no” decision. Once they decide to go for factor investing, investors have to make a number of important decisions that are crucial to the success of their strategy. The first concerns which factors to allocate to. Although this may seem very basic, it is far from a trivial consideration. Most product providers focus on a handful of well-vetted factors, but academics are still debating whether looking at the more exotic, recently reported factors adds value.

The second major element investors need to decide on is the weight they wish to give to each factor in their strategic allocation mix. This issue is also hotly debated among academics and practitioners. While some argue factor exposures can be timed tactically and factors showing the best short-term potential should be given priority, others – including Robeco – acknowledge that timing is difficult and advocate a balanced exposure, unless a specific factor is of strategic interest.

The third crucial step is to make sure the chosen solution efficiently harvests factor premiums. This means being able to identify the risks to which you will be exposed when you engage in factor investing and to understand which risks are necessary and which are not. This is why it is also very important to be able to develop tools that help identify and eliminate unrewarded risks.

1 A. Ang, W. Goetzmann and S. Schaefer, ‘Evaluation of Active Management of the Norwegian Government Pension Fund – Global, prepared at the request of the Norwegian Ministry of Finance, 2009.

Achieving your investment goals with factors

This series of articles aims to illustrate the wide variety of investment goals that can be achieved through factor-based strategies.

Read all of the articles:

Achieving your investment goals with factors: Reduce risk Achieving your investment goals with factors: Enhance returns

重要事項

当資料は情報提供を目的として、Robeco Institutional Asset Management B.V.が作成した英文資料、もしくはその英文資料をロベコ・ジャパン株式会社が翻訳したものです。資料中の個別の金融商品の売買の勧誘や推奨等を目的とするものではありません。記載された情報は十分信頼できるものであると考えておりますが、その正確性、完全性を保証するものではありません。意見や見通しはあくまで作成日における弊社の判断に基づくものであり、今後予告なしに変更されることがあります。運用状況、市場動向、意見等は、過去の一時点あるいは過去の一定期間についてのものであり、過去の実績は将来の運用成果を保証または示唆するものではありません。また、記載された投資方針・戦略等は全ての投資家の皆様に適合するとは限りません。当資料は法律、税務、会計面での助言の提供を意図するものではありません。

ご契約に際しては、必要に応じ専門家にご相談の上、最終的なご判断はお客様ご自身でなさるようお願い致します。

運用を行う資産の評価額は、組入有価証券等の価格、金融市場の相場や金利等の変動、及び組入有価証券の発行体の財務状況による信用力等の影響を受けて変動します。また、外貨建資産に投資する場合は為替変動の影響も受けます。運用によって生じた損益は、全て投資家の皆様に帰属します。したがって投資元本や一定の運用成果が保証されているものではなく、投資元本を上回る損失を被ることがあります。弊社が行う金融商品取引業に係る手数料または報酬は、締結される契約の種類や契約資産額により異なるため、当資料において記載せず別途ご提示させて頂く場合があります。具体的な手数料または報酬の金額・計算方法につきましては弊社担当者へお問合せください。

当資料及び記載されている情報、商品に関する権利は弊社に帰属します。したがって、弊社の書面による同意なくしてその全部もしくは一部を複製またはその他の方法で配布することはご遠慮ください。

商号等: ロベコ・ジャパン株式会社  金融商品取引業者 関東財務局長(金商)第2780号

加入協会: 一般社団法人 日本投資顧問業協会

本記事に関連するテーマ: