Many of the world’s largest institutional investors have adopted factor-based portfolio construction, shifting the conversation from “why” to invest in factors to “how”.
Please join us online on Tuesday, 2 July at 7:00am BST when Scott Bennett, head of quantitative research and client solutions, Australasia at Northern Trust Asset Management, will uncover some of the key pitfalls to avoid and the most critical components to consider in any factor portfolio. Key topics include:
- The definition of factors and why it matters: One manager will likely define categories, factors, or even strategy risks differently from the next. The Value factor is an example of this as many managers choose to focus on price-to-book calculations, but we believe this may lead to being overweight in financials and possible underweight of the technology sector.
- Targeting pure factors and reducing the effects of uncompensated risks: When tilting toward any factor there is a strong tendency to gain exposure to unintended risk, as well as uncompensated or even negatively compensated biases, including sector, region, certain style factors and idiosyncratic risk. Low-volatility portfolios demonstrate this well, often found with a natural large-cap and/or negative value bias.
- Using factors in the current market environment: We believe the slow-growth expansion will continue for a while, with low inflation and accommodative central bank policy, an environment which historically has produced excess returns for most factors. But what if things get more volatile than expected?
Scott Bennett, Head of Quantitative Research & Client Solutions, Australasia
Scott Bennett is head of quantitative research and client solutions, Australasia where he is responsible for working with institutional clients across Australian and global equity markets. He has more than 18 years of investment experience. Prior to joining Northern Trust Asset Management, Scott led the global quantitative research effort at Russell Investments, where he was responsible for $40 billion of systematic strategies. He began his career managing Australian equity portfolios that included after-tax, smart beta and multi-manager strategies.
Scott earned his bachelor’s degree in business (economics and finance) with distinction from RMIT University and a master’s in finance (applied finance) from the University of New South Wales (UNSW).
Northern Trust Asset Management is a global investment manager that helps investors navigate changing market environments, so they can confidently realize their long-term objectives. Entrusted with more than $956 billion of assets,1 we understand that investing ultimately serves a greater purpose and believe investors should be compensated for the risks they take — in all market environments and any investment strategy.
1Assets under management as of March 31, 2019.