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Figure 1: Sharpe ratios multi-asset portfolios over the risk-free rate
0,00 0,20 0,40 0,60 0,80 1,00 1,20
1,08 1,00 0,93 0,83
Traditional
Equity factor investing
Corporate bond factor investing
Equity + corporate bond factor investing
Period: January 1994 - December 2017 Sources: Robeco, Barclays, Bloomberg, Data Library Kenneth French.
Enhanced factor investing Robeco research has also shown that it is possible to improve on these academic results by enhancing the factor definitions and by enhancing the portfolio construction. In doing this, it is important to under- stand the latent risks in each factor and to mitigate those that are not properly rewarded with higher returns and to diversify across variables. This can be done by expanding the scope of these variables beyond bond market characteristics, for example, by also looking also at accounting and equity data.
In terms of portfolio construction, performance can also be enhanced in several ways. These methods include focusing on reducing turnover and keeping down transaction costs, avoiding unintentional nega- tive exposure to other factors in a single-factor portfolio and finally preventing large sector and region bets to prevent concentrated positions and improve diversification.
Robeco offers single-factor and multi-factor strategies in investment grade and high yield that can be implemented as standalone solutions or incorporated in a multi-asset approach. To learn more about our offering visit
robeco.com
Important information
This publication is intended for professional investors. Past performance and forward looking statements are not a reliable indicator of future performance, investments may go up as well as down. Robeco Institutional Asset Management B.V. has a license as manager of UCITS and AIFs of the Netherlands Authority for the Financial Markets in Amsterdam and is subject to limited regulation in the UK by the Financial Conduct Authority. Details about the extent of regulation by the Financial Conduct Authority are available from us on request.
September 2019 portfolio institutional roundtable: Factor investing 27
Sharpe ratio
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