In this episode Matt and Jack look at factor investing from both the perspective of someone who builds quantitative strategies and someone who utilizes them. They discuss what factors are, why they work, the different ways to combine them into multi-factor portfolios, the importance of matching an investment strategy with the end user’s goals and risk tolerance, the important of human capital in portfolio construction and a lot more.
Quick Episode Links
- 02:55 – What is a factor?
- 06:04 – Durable opportunities and why factors work
- 09:05 – The trade-off between value and quality
- 12:03 – Isolating vs. blending factors
- 14:32 – Quant strategies vs. discretionary managers
- 16:08 – Breaking down active manager performance using factors
- 18:05 – Systematic and quantitative are not the same thing
- 19:59 – Focused vs. diversified factor investing
- 22:17 – Building multi-factor portfolios
- 24:26 – The two different methods to constructing multi-factor portfolios
- 27:29 – The nuances of multi-factor investing
- 28:41 – The most important factors in rebalancing decisions
- 30:21 – Analyzing multi-factor strategies
- 31:56 – Quants are subject to biases and emotions too
- 32:47 – How building multi-factor strategies is similar to creating music
- 37:32 – All value strategies aren’t the same
- 39:50 – The balance between investing and human capital
- 48:51 – The importance of outcomes in investing
