Forms part of an investment strategy that selects high-quality companies.
The criteria for this factor can be 'hard' (e.g., returns on shareholders' equity and free cashflows), but the application of this factor can also be based on 'softer' criteria such as quality of management, corporate governance and market position. As there is no precise fixed definition for Quality, academic circles are debating the use of this factor.
Valuation can also play a role in the selection of Quality stocks. Therefore, ongoing debate is questioning whether this factor differs from the Value factor. Researchers Assness and Frazzini* define the Quality factor as investing in the stocks of safe, profitable, expanding and well-managed companies.
Interest in the Quality factor increased in the aftermath of auditing scandals such as the Enron affair in 2001. Another reason for the increased interest in the Quality factor is the possibility of achieving greater diversification.
* Clifford S. Asness, Andrea Frazzini, and Lasse H. Pedersen: 'Quality Minus Junk', 2013
This page is intended for US prospects, clients and investors only and includes information about the capabilities, staffing and history of RIAM US and its participating affiliates, which may include information on strategies not yet available in the US. SEC regulations are applicable only to clients, prospects and investors of RIAM US. Robeco BV, Robeco HK and Robeco SH are considered a “participating affiliate” of RIAM US and some of their employees are “associated persons” of RIAM US as per relevant SEC no-action guidance. Employees identified as associated persons of RIAM US perform activities directly or indirectly related to the investment advisory services provided by RIAM US. In those situations, these individuals are deemed to be acting on behalf of IUAM, a US SEC registered investment adviser.By clicking I agree, I confirm that I have read and understood the above.