The quarterly Satrix Style Tracker chronicles the success of a range of factors over the medium to long-term for the South African investor. In this publication, we share with you our analysis for the final quarter of 2019.
Introducing Factor Investing
Factors are measurable characteristics of listed stocks that may in some way explain future performance. The most well understood factor is likely the price to earnings (PE) ratio. Many studies have shown that stocks that have low PEs tend to outperform stocks with high PEs over the long term. This is often referred to as ‘value investing’ in the active space. We measure many of these ‘factors’ and then test to see whether they have any predictive power.
Factor investing has the ability to empower asset consultants and multi-managers to build client portfolios simply and efficiently. Factor investing is revolutionising both the passive and active investment industry, from the transparent way in which factor portfolios are systematically constructed to the capability of building tailored investment outcomes with greater diversification and predictability to lower fees, and lastly to reliably and consistently delivering a specific investment philosophy.