The strategies shown in this report are factors we believe are the most significant in our domestic market. The universe we use is the All Share universe excluding property and small cap shares. We rank the stocks from highest to lowest for each factor and divide the universe into quintiles (subsets or groups of 5). We then calculate the quintile spread by taking the top quintile’s return experience less that of the bottom quintile. Rebalancing and performance calculations are conducted each month. The performance results do not reflect transaction costs, tax withholdings or any investment / advisory fees.
The results of these quantitative factor strategies are significantly less diversified, and, as such, their performance is more exposed to specific stock or sector results. Past performance should not and cannot be viewed as an indicator of future performance.
While many factors outperform over the long-term, all suffer from periods of underperformance. Combining factors reduces the exposure to a single factor’s cyclical risk, and can create more diversified portfolios.
If you consider the MSCI World as your universe, Growth, Quality and Price Momentum have been the clear outperformers since the start of the year. Despite the latter half of 2016 seeing the ‘reflation trade’ firmly in place, we have seen a marked reversal in 2017 with the year-to-date Value factor underperforming Growth significantly, due to the global economic recovery tracking well, strong corporate earnings and fading policy uncertainty.
Click here to download the PDF version.