Factor investing is an investment approach that involves targeting specific drivers of return across asset classes. There are two main types of factors: macroeconomic and style. Investing in factors can help improve portfolio outcomes, reduce volatility and enhance diversification.
Types of Factors
There are two main types of factors that have driven returns:
Macroeconomic Factors capture broad risks across asset classes.
Style factors help to explain returns and risk within asset classes.
Consider these Factor-based Strategies to help drive your goals:
1. Generate outperformance
Modernize your approach to the traditional style box and use factors to target specific sources of return.
2. Manage risk
Don’t let market volatility get in the way of achieving long-term investment outcomes. Factor investing can offset potential risks by targeting broad, persistent, and long recognized drivers of returns.
3. Enhance diversification
Investors can access factors in more advanced ways across multiple asset classes and long-short strategies.
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