Factor Performance Review

Of the six factors we track (growth, quality, low-volatility, momentum, size, and value) in our multi-factor strategy, the low-volatility factor enjoyed the best performance over the past month, turning in 4.7% relative to its benchmark. The small-cap factor also had a good month, earning 3.8% relative to its benchmark; the strong performance for small-caps followed a weak January, when the small-cap factor underperformed by 4.5%. Value also outperformed over the past month, contributing 2.2%. Performance for each of the six factors is shown as the gray bars in Fig. 1.

Despite its strong performance last month, the size factor (small-caps over large-caps) still lags the other five factors, as it has underperformed by 19.9% on a trailing 12-month basis. Also, despite its recent outperformance, value continues to lag on a trailing 12-month basis.

Fig. 1 – Recent Performance of Factors

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Multi-Factor Portfolio Performance Review

We apply a dynamic tilting mechanism to a multi-factor portfolio that adjusts weight toward the factors with the best recent performance, and away from the factors with the worst recent performance. Fig. 2 shows the cumulative performance of this dynamic mul...

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