Category Archives: Smart Beta

Using Factor Analysis to Explain the Performance of Dividend Strategies

Factor tilts have resulted in divergent dividend strategy performance following the November elections November’s US elections have buoyed investor optimism about the potential for tax reform, increased infrastructure spending, reduced regulation and accelerating economic growth. These expectations led to a 0.75% spike in the 10-year Treasury yield between Nov. 8 and Dec. 16, and a Read more […]

When Quant and Qual Become One

I’ve previously written about the convergence of typical “strategy” or “factor” indices with sustainable indices.  In 2016, we saw this rise as a trending topic in the market and we expect the interest to increase in 2017.  This multifaceted approach has been well illustrated in many aspects of our offerings, but I wanted to focus Read more […]

A New Metric for Smart Beta: The Cost-Adjusted Factor Efficiency Ratio

With an increasing number of smart beta strategies that track the same factor in the marketplace, it is more important than ever to understand the underlying drivers of risk and return of these strategies, which can vary greatly.  This is because the underlying portfolio construction of these strategies determines risk and return and, ultimately, the Read more […]

Smart Beta in India

2016 has been an unpredictable year on many fronts, whether it was Leicester City FC winning the Premier League, the Brexit, or the U.S. election results.  In India, “demonetization” and the Goods and Services Tax (GST) are fundamentally altering fund managers’ target portfolios.  Active institutional fund managers have the benefit of professionally run research teams. Read more […]

Visualizing Factor Exposures

Measuring the away-from-benchmark exposures of active portfolios (or “smart beta” indices) is not inherently complicated.  To what degree, for example, is a portfolio cheaper than its benchmark, or more tilted toward high quality stocks?  Practitioners typically approach the question in one of several ways: Calculating weighted average differences – e.g., the yield on my portfolio is Read more […]

Quality: A Driving Factor of Small-Cap Returns

Much has been written about the performance differential between the two leading small-cap indices, the S&P SmallCap 600® and Russell 2000.  Over a long-term investment horizon, the S&P SmallCap 600 has outperformed the Russell 2000 with less risk.  Part of the performance differential can be attributed to the June Russell rebalancing effect.  As winners from Read more […]

The Making of a Passivist

I have few memories of my school French, but one of the fondest is of Moliere’s Monsieur Jourdain, who was delighted to learn in middle age that he had been speaking prose for the last 40 years.  Similarly, I did not realize until recently that I was a “passivist,” as the Wall Street Journal has now anointed the Read more […]

Examining Sector and Factor Performance in the Third Quarter of 2016

High beta, value factors among the star performers, while low volatility lags amid heightened appetite for risk The high beta, value and size factors outperformed the broad-market S&P 500 Index by a sizeable margin during the third quarter, with the S&P 500 High Beta Index gaining 12.18% during the three-month period – outpacing all other Read more […]

2016 Presidential Election: Can Put Options Help Reduce Portfolio Volatility?

No other recent presidential elections have been as divided as this year’s.  As the objectivity and credibility regarding poll numbers and media coverage of the candidates are being questioned, the U.S. economy and the capital market are facing an unusual level of political risk.  Market participants may seek various tools to hedge the downside risk, Read more […]

Examining Low Volatility’s Performance in Various Market Environments

Rates, volatility and a broad market rally have contributed to the factor’s late-summer slump Late summer has not been fruitful for the low volatility factor. From July 6 to Sept. 9, the S&P 500 Low Volatility Index has fallen by 4.67%, while the S&P 500 Index gained 1.70%.1 This is in sharp contrast to the Read more […]