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Large-scale factor investing

Large-scale factor investing

08-07-2015 | From the field

A study* by MSCI for the Norwegian Ministry of Finance examines how factor investing can be applied to very large portfolios, such as the EUR 700 bln Norwegian reserve fund. Consistent with previous studies by Robeco they recommend allocating to, amongst others, the value, momentum and low-volatility factors.

  • David Blitz
    David
    Blitz
    Head of Quant Research

Although the indices proposed by MSCI to harvest these factors have excellent investability characteristics, they represent low-conviction approaches which only tilt the portfolio slightly towards a given factor. This helps to explain the relatively modest Sharpe ratio improvements reported in the study.

We find that enhanced factor solutions offer much more attractive performance characteristics. Examples of such enhancements are avoiding risks that are not properly rewarded, and preventing going against other proven factors, when focusing on one particular factor.**

Blijf op de hoogte van kwantitatieve inzichten
Blijf op de hoogte van kwantitatieve inzichten
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From the field
From the field

Onze onderzoekers publiceren veel whitepapers die zijn gebaseerd op hun eigen empirische onderzoek, maar ze kijken ook naar kwantitatief onderzoek dat door anderen is gedaan. David Blitz, hoofd Quant Equities Research, vertelt over opvallende externe papers.

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