Erik van Leeuwen


“Factor investing is a different way of creating alpha.” Erik van Leeuwen, Robeco


lunch. Everybody needs to realise that different investment styles can lead to underperformance, but you must stick with your belief. Stuart Trow: As a strategy you have two problems. One is a portfolio manager curve-fitting, where one name can completely skew the research from the strategy. The quarterly reporting issue is quite big, but at what point, especially in credit, do you decide it’s not working? One problem we have is deciding when to take a loss on credit. If the strategy’s not working because you have curve-fitted it and you have replicated something that happened in the past, at what point do you pull the plug? From my own trading experience, it is sobering because I had a couple of good years and thought I was good at picking stocks, but it wasn’t. It was because I was prepared to chuck the stuff that wasn’t working. Barron: The regime shifts that pundits are starting to point to is interesting. All the academic research is from the 1970s, ‘80s and ‘90s but companies are a little different now. Intangibles don’t necessarily make their way into book value anymore. We have some clients in single-factor value strategies who are anti them right now, because the draw- down is significant relative to market cap and they are paying more in transaction costs for that product. So, when do you pull?


September 2019 portfolio institutional roundtable: Factor investing 13


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