Equities Through a Multi-Factor® Lens
At Gerstein Fisher, we apply a Multi-Factor® approach to construct broadly diversified portfolios that are tilted toward the factors that academic research has shown to drive returns.
This approach is designed to capture key strengths of both traditional active and passive or index investing while at the same time attempting to minimize their respective shortfalls.
Factor-Based Equity Investing in Context
Tilting Toward Rewarded Risks
In our Multi-Factor® equity strategies, we construct portfolios to have higher exposures (relative to their benchmark) to targeted quantitative investment factors. Examples of these may include: market capitalization, relative price momentum, asset growth, profitability, and valuation.
Our models continually evolve to incorporate new factors as research bears out their efficacy, and the mix of factors is recalibrated over time. What remains consistent is our focus on extracting a return premium by focusing on the factors that have been identified to be associated with higher expected returns.
Gerstein Fisher builds Multi-Factor® portfolios that have index-like features, but using fewer securities. We accomplish this by investing in a representative segment of the market (a practice referred to as “sampling”) and avoiding taking outsized risks in specific companies, industries, or countries. Holding and trading fewer securities potentially lowers costs.
When it comes to executing trades, we are focused on efficiency and cost minimization. Our trading process is dynamic and opportunistic; we employ careful pre-trade analysis to evaluate the potential market impact of buys and sells, and post-trade analysis to gain clarity on the effectiveness of our process. The lower our trading costs, the more returns our investors get to keep.
Why a Multi-Factor® Approach to Investing?
- A structured, quantitative approach based on decades of academic research that is continually refined with leading-edge research
- Broadly diversified portfolios that offer consistent asset class exposure with the potential to outperform benchmark returns
- Transparency of process and results