Microcaps’ Factor Spreads, Structural Biases,
and the Institutional Imperative
(Part 1 of 2)

Categories Author: Ehren Stanhope, Investing, Market Cap

The ironic twist to the proliferation of “factor”-based strategies in recent years is that the overwhelming majority of these strategies are1 launching in U.S. Large Cap Equity — the most competitive arena for any financial market in the world. Sure, factors can be effective in large cap but, lately, discerning investors are discovering that the factor research in eclectic corners of the market is much more compelling. This article presents our findings in perhaps the most capacity-constrained of those eclectic corners: microcap. Despite some unique considerations as it relates to liquidity and tradability (to be covered in Part 2 of 2), the opportunity in Micro is hard to ignore.2 Continue reading “Microcaps’ Factor Spreads, Structural Biases,
and the Institutional Imperative
(Part 1 of 2)”

Microcaps’ Factor Spreads, Structural Biases,
and the Institutional Imperative

Categories Author: Jim O'Shaughnessy, Insight, Investing

“What Works on Wall Street” Podcast
Many investors readily agree that alpha is scarce. It is hard to find, always in great demand, and requires skill to extract. The eclectic microcap universe provides a disparate group of continually evolving and devolving businesses with structural features that remain persistently attractive for investors…


Episode 1 transcript: Continue reading “Microcaps’ Factor Spreads, Structural Biases,
and the Institutional Imperative”

Factor Crowding, Cobras,
and Other Market Hyperboles

Categories Author: Jim O'Shaughnessy, Insight, Investing

“When a measure becomes a target, it ceases to be a good measure.”
— Goodhart’s Law1

“What Works on Wall Street” Podcast
After reading as many as 18 different WSJ articles on the subject, it’s understandable why investors might be up in arms about the alleged perils of factor crowding. We hope this discussion allays some of those concerns…


Episode 1 transcript: Continue reading “Factor Crowding, Cobras,
and Other Market Hyperboles”

2017 Factor Alpha Newsletter
International ADR

Categories Investing, OSAM Research

While investors have long enjoyed the growth in U.S. equities (usually the largest allocation in their overall portfolio!), regional leadership is a cyclical pattern. At some point, it is very likely the U.S. will no longer be the highest-performing market globally. Huh?1 Sure, the U.S. equity market has risen 293% since its credit crisis bottom in March 2009 — versus Developed International and Emerging Markets “mere” rise of 150% and 154%, respectively. Well, this 2Q17 International ADR2 (IADR) edition of the Factor Alpha Newsletter, dispassionately, sans headlines and other noise, compares our built-in-house multi-factor themes to the MSCI ACWI ex U.S.3

Continue reading “2017 Factor Alpha Newsletter
International ADR”

5 Ways a Factor Alpha Approach
Can Boost REIT Portfolios

Categories Author: Chris Meredith, Author: Travis Fairchild, Investing

Here’s what we found:

  • The public real estate market is uniquely inefficient and a fertile ground for active, factor-based investing.
  • Real estate is a diversifying asset class with many benefits, but most investors are under-allocated.
  • Public REITs offer complementary exposure while avoiding the drawbacks and barriers to entry of private real estate, but with lower fees and no loss of performance. 

Continue reading “5 Ways a Factor Alpha Approach
Can Boost REIT Portfolios”

Visualizing Factors & Themes — What You See is What You Get

Categories Insight, OSAM Research, Value, Yield

“Is there a point where index funds theoretically can’t work a course?” asked Charlie Munger at this year’s Daily Journal Corporation Annual Meeting.1 “If everybody bought nothing but index funds, the whole world wouldn’t work as people expect.”

We agree.
So to help animate Munger’s premonition in real-time (see the cheery motion graphics below), our Team’s Developer / Performance Analyst)2 rolled up his coding sleeves and hacked into our “Factor Style Grid”.  Continue reading “Visualizing Factors & Themes — What You See is What You Get”

They Can’t All Be That Smart
A Due Diligence Framework for Factor Investors (Part 2)

Categories Author: Chris Meredith, Insight, Investing

Part 1 of this article delineates factor-based strategies — fundamental weighting,1 smart beta, and Factor Alpha — by showing the differences between them. Also covered in Part 1 is a comparison of risk-focused and return-focused factor implementation.2

Part 2 covers how risk controls3 and using Active Share4 can help determine the alignment between factors and portfolio construction for, as well as the fees you should expect to pay.
Continue reading “They Can’t All Be That Smart
A Due Diligence Framework for Factor Investors (Part 2)”

They Can’t All Be That Smart
A Due Diligence Framework for Factor Investors

Categories Author: Chris Meredith, Insight, Investing

Not all factor products are smart. This article delineates factor-based strategies — fundamental weighting, smart beta, and Factor Alpha — by showing the differences between them. It also provides a framework1 for determining the alignment between factors and portfolio construction, as well as the fees you should expect to pay.  Continue reading “They Can’t All Be That Smart
A Due Diligence Framework for Factor Investors”