Excess Returns, Ep. 14: Some Thoughts on the Struggles of Factor Investing in the Past Decade

The long-term evidence to support factor investing is compelling. Academic work has shown that factors like value and momentum have produced an excess return relative to the market over time. But what occurred in the most recent decade was in many ways the opposite of what has happened over the long-term. Almost anything an investor did to get away from buying large growth companies over that period was a detraction from returns. In this episode, we try to put the struggles of factor investing in context and talk about some lessons we can learn from this difficult decade.

We discuss:

  • Why the timeframe to judge whether a factor no longer works is likely longer than your investing lifetime
  • Why the definition of long-term may be a lot longer than you think
  • The importance of achieving the right match between a factor strategy and the investor in it.

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