Factor strategies do not deliver


Factor strategies have not been performing well as the implicit sector bets proposed by the factors have a considerable impact on short-term performance, according to the EDHEC Risk Institute.
Also, the sector-neutral versions of the multi smart factor indices were those that were resisting best to the underperformance of factors.
According to the report, over the past ten years, the SciBeta Developed Multi-Beta Multi-Strategy 4-Factor Equal-Weight index, the SciBeta Developed High Factor Intensity Diversified Multi-Beta Multi-Strategy 6-Factor 4-Strategy Equal-Weight index, the SciBeta Developed High Factor Intensity Diversified Multi-Beta Multi-Strategy 6-Factor 4-Strategy Equal-Weight Market Beta Adjusted (Leverage) index and the SciBeta Developed High Factor Intensity Diversified Multi-Beta Multi-Strategy (Sector Neutral) 6-Factor 4-Strategy Equal-Weight index posted strong annual relative returns of 1.58 per cent, 3.17 per cent, 4.72 per cent and 2.78 per cent respectively compared to cap-weighted indices.
Also, this quarter saw four indices which posted negative relative returns of -0.92 per cent, -0.54 per cent, -0.48 per cent and -0.05 per cent respectively compared to cap-weighted indices.
As far as multi smart factors indices were concerned, the past quarter saw cumulative excess returns, with the best performing index being the SciBeta Developed Europe High Factor Intensity Diversified Multi-Beta Multi-Strategy 6-Factor 4-Strategy Equal-Weight Market Beta Adjusted (Leverage) index with a relative return of 1.30 per cent, while the worst performing index is the SciBeta Developed Asia-pacific ex-Japan High Factory Intensity Diversified Multi-Beta Strategy 6-Factor 4-Strategy Equal-Weight Market Beta Adjusted (Leverage) index with a relative return of -4.88 per cent.
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