History of Factor Investing
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.
We have considered factor investing/smart beta investing in the context of equities as an asset class. The endeavour here has been to construct equity portfolios with single or multiple factors with the objective of reducing volatility and outperform benchmark over 3-to-5-year market cycle.
At the fundamental level, factors relating to equities include Size, Momentum, Value, Volatility, Alpha, Quality among others.