Factor investing can be a challenging topic to navigate.
With an alphabet soup of terms and explanations, it is easy to lose sight of the bigger picture when seeking to understand what is behind a factor-based investment approach.
In this article, the first in a three-part series, we hope to shine a light on factor investing, explaining some of the history, key concepts and drivers behind this investment style.
Put simply, factor investing is an investment approach that involves targeting quantifiable characteristics or “factors” that can explain differences in security returns.
A factor-based investment strategy will tilt a portfolio towards or away from specific factors, seeking to harness favourable characteristics in order to generate additional return, or reduce risk, in comparison with the wider market.
Factors are a set of properties common to a broad set of securities, and a…
