Scientific Beta

This research-oriented masterclass examines a number of important issues that need to be considered in the field of factor investing for investment professionals. The guiding thread of the masterclass is “Can one build a multi-factor strategy by only adding the “best” factors, in the sense of single factor performance?”.

 

Overview

This research-oriented masterclass examines a number of important issues that need to be considered in the field of factor investing for investment professionals. The guiding thread of the masterclass is “Can one build a multi-factor strategy by only adding the “best” factors, in the sense of single factor performance?”.

The event is organised in three parts and all include an approximate 10-minute Q&A session.

Programme

Tuesday, 4 April, 2023
All times CEST (Central European Summer Time)

Background and Content Outline

Questioning Industry “Innovation”

In response to the losses generated by traditional equity factors in 2019 and 2020, the industry has come up with new factors that have managed to outperform in recent backtests, such as sustainability, innovation and machine learning factors. Chasing such short term return trends will likely turn out to be futile for investors. In contrast, it is worth paying close attention to implementation and risk management when investing in any set of equity factors. We will outline some of the key issues for constructing multi factor portfolios. These issues should rank highly on the agenda of factor investors who want innovation that improves the outcomes of real world portfolios built for the long term.

Crucial Questions for Constructing Multi Factor Equity Portfolios

It is well documented that portfolio tilts to standard equity factors may work against each other. A salient example is a portfolio that adds a momentum tilt to a value portfolio and ends up with a reduced value exposure. Several techniques exist to avoid such dilution of overall factor exposures. We will discuss how one can implement an approach that maintains tractability and diversification while avoiding dilution of factor exposures.

Factor tilts lead to implicit exposures to industry and macro risks. An example is that a typical value tilt will lead to exposure to financial stocks and display returns that are sensitive to unexpected increases in the term spread, as value stocks have lower duration than growth stocks. Factor investors have to ask which of these risks they can tolerate and which they should manage. This requires a sound understanding of the trade-offs involved in hedging out such exposures.

Catch Up with Climate Risk

Climate transition risk has become a key concern for institutional investors. They need to understand how their factor tilts interact with transition risk exposure. A key challenge for portfolio construction is to integrate objectives in terms of exposure to style factors and transition risk exposure. We will explore market-based measures of transition risk and their use in portfolio construction for multi factor investors.

Speakers

Daniel Aguet 

Daniel Aguet is Deputy CEO & Index Director at Scientific Beta. He previously worked at BCV, a Swiss bank based in Lausanne, as a Quantitative Investment Manager for more than 10 years. His work was mainly focused on quantitative research and fund management in the equity space. He has been involved in the development and the management of smart beta portfolios both in a long-only and a long/short framework, as well as in research on the quantitative implementation of socially responsible investment. Daniel is a Chartered Alternative Investment Analyst (CAIA) and holds a Master’s degree in Finance with a specialisation in Financial Engineering and Risk Management from HEC Lausanne

Felix Goltz 

Felix Goltz, PhD, is Research Director at Scientific Beta and associate researcher at EDHEC Business School. He has been with Scientific Beta since inception. He carries out research in empirical finance and asset allocation, with a focus on alternative investments and indexing strategies. His work has appeared in various international academic and practitioner journals and handbooks, including the Journal of Portfolio Management, the Financial Analysts Journal, the Journal of Index Investing, the Journal of Investment Management and the Handbook of Finance (Wiley). He obtained an MSc and a PhD in finance from the University of Nice Sophia-Antipolis after studying economics and business administration at the University of Bayreuth and EDHEC Business School.

Registration

To attend this online masterclass, please visit the dedicated registration web page. 

Attendance at this event is exclusively for asset owners and institutional consultants.

For any additional information on the event, please contact Séverine Cibelly at severine.cibelly@scientificbeta.com or on +33 493 187 863.