A simple factor rotation model can take advantage of the increasing dispersion of factor returns, particularly in volatile investment markets.”
~ Joseph Stein
Director of Quantitative Research
Natixis Investment Managers Solutions
Factors are often defined as common drivers of security returns across asset classes. Since the Covid-19 outbreak in March 2020, factors have been a notable driver of equity market returns.
To capitalize on both increasing dispersion and decreasing correlation among factor returns, we evaluated a simple US equity factor rotation model. The strategy focuses on liquid US ETFs designed to track five common style factors – value, size, quality, growth and volatility. Our research suggests that a factor momentum strategy could outperform broad US equity markets in both high and low volatility environments.
Factor Momentum – Adding Value with Style
Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed are as of December 2022 and may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted. Actual results may vary.