Scientific Beta

Euromoney: "The question is whether or not this more diverse approach to smart beta, known as factor investing, will be enough to perform in a period of heightened volatility. Felix Goltz, head of applied research at EDHEC Risk Institute in Paris, says it depends on the factors. “Even in multi-factor strategies, if they include one or several factors that are defensive, you can get interest-rate exposure,” he explains."

Euromoney 01/08/2017

"(...) The question is whether or not this more diverse approach to smart beta, known as factor investing, will be enough to perform in a period of heightened volatility. Felix Goltz, head of applied research at EDHEC Risk Institute in Paris, says it depends on the factors. “Even in multi-factor strategies, if they include one or several factors that are defensive, you can get interest-rate exposure,” he explains. “Quite often multi-factor strategies might have defensive characteristics and some might give you minimum variance-like performance. As an investor, you should be concerned about this and you should avoid such strategies if you do not want this bias. But you can control such biases within a multi-factor approach by allocating to the appropriate factors.” (...) EDHEC’s Goltz argues that the appetite for passive strategies will remain robust. “The move to passive investment has nothing to do with low interest rates,” he declares. “It is driven by the disappointment of investors in active strategies. The promise of alpha has not been delivered. A rise in interest rates will be good for active managers that out-guess the market concerning this hike, but, on average, active managers won’t.” (...)"