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Although Factor Investing is rapidly gaining popularity, there are still ongoing debates about this concept. In our view, the key feature of Factor Investing is that asset owners select factors and their weights themselves, rather than leaving this up to their asset managers.
Factor investing – the investment strategy that aims to capture ‘hidden’ returns in financial markets – is rapidly gaining in popularity. However, it is important to follow the right factors, and to be wary of one factor counteracting another, to get the best results. Otherwise, investors might follow generic factor strategies that expose them to risks that are not properly rewarded, resulting in inferior performance.
Investors increasingly decide to allocate strategically to factor premiums such as Value, Momentum and Low-Volatility. Robeco is now incorporating a fourth factor, Quality, in the investment process of its factor funds.
The much anticipated ‘Factor Investing – Collected Robeco articles’ (the 2nd edition) is now available. We’re delighted to present this book on factor investing, which brings together ten articles that Robeco researchers have published over recent years.
Investing in market-cap weighted indexes and factor indexes has serious disadvantages, according to Han Dieperink and Joop Huij. An active approach to factor investing works better.
To the best of our knowledge, no study has been conducted on the added value of innovative investment strategies that incorporate academic insights. As a result, we do not know how many investment managers have incorporated academic insights or how successful they are. We have researched the topic to fill this gap in the literature.
Investors are increasingly becoming aware of the advantages that factor investing has to offer. Joop Huij answers ten questions on the concept and the implementation.
In 2014 Robeco went live with its Factor Investing Solutions: tailored solutions based on multiple factors. “Robeco is not the founder of factor investing, but we are among the first to translate the theory into practical investment solutions,” says Robeco’s Head of Factor Investing Research Joop Huij with pride.
Factor investing is becoming more popular. Professional investors are increasingly considering investing strategically in certain parts of the financial market which realize better risk-adjusted returns over longer periods. The question is: “How can investors best implement this strategy?”
There is a shift towards allocating to the factor premiums momentum, value and low volatility. However, since common factor indexes are a suboptimal way to harvest factor premiums, this paper shows the improved results of a more sophisticated approach. Factor strategies developed by Robeco lead to higher returns, while lowering the risks, resulting in higher Sharpe ratios.
You would not be pleased if you thought you had the right exposures to factors that drive expected returns, but it turns out you actually have precisely the opposite tilts. This is happening quite often though. Quantitative researcher Joop Huij and head of equity research David Blitz argue that institutional investors should be careful when assessing asset managers.
Factor investing is gaining ground. In a special whitepaper “an introduction to factor investing” Robeco explains what it is and how to set up your investment portfolios accordingly.
In this study we evaluate the performance of actively managed equity mutual funds against a set of passively managed index funds.
New research from Robeco identifies and corrects for biases in analyst earnings revisions, says Senior Quantitative Equities Researcher, Joop Huij.
A short-term reversal strategy based on residual momentum reduces exposure to systematic factors and results in lower risk and better returns than a conventional momentum strategy.
Several studies report that abnormal returns associated with short-term reversal investment strategies diminish once transaction costs are taken into account.
In this note we evaluate the performance of active and passive emerging markets equities (EME) funds. In the first section, we investigate if it is possible to identify active EME funds that systematically outperform passive benchmark indexes. This section is based on a more extensive paper by Joop Huij and Thierry Post. In the next section, we examine the performance of passive EME funds, focusing on whether these funds succeed in their objective to closely track the return of a passive benchmark index. This section is based on a more extensive paper by David Blitz and Joop Huij.
This comprehensive investigation of the relation between the value anomaly and distress risk finds that value stocks are not cheaper than growth stocks due to the risk of financial distress.
This comprehensive investigation of the relation between the value anomaly and distress risk finds that value stocks are not cheaper than growth stocks due to the risk of financial distress. While the study looked at US stock returns, the research applies to emerging markets as well.
Emerging markets ETFs typically underperform benchmarks by 1% a year and about half of the funds exhibit high tracking errors. With these characteristics, should they be classified as passive strategies?
European index funds and exchange-traded funds underperform their benchmarks by 50 to 150 basis points per annum. The explanatory power of dividend withholding taxes as a determinant of this underperformance is at least at par with fund expenses.