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Factor-Based Investing

 
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Leading Investment Management

Put risk to work in your favor

Did you know? Factors drove nearly all excess returns over the past 50 years. Read more in Factor-Based Investing Q&A.

Understanding Factor Investing

An introduction to factors: why have they created excess returns and how can they be combined to be even more effective? 

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Evaluating the Efficiency of Smart Beta Indices

On average, the most popular smart beta products only captured 17% of the factor they targeted. Our global equity team explains why.

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Combining Risk Factors for Superior Returns

Strong factors work better when combined because they smooth returns over time. Even more, mixing the quality factor with other factors is especially powerful.

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What is the Quality Factor?

Quality is the most powerful factor, but the hardest to define. Learn how Northern Trust Asset Management defines it — and how our proprietary quality score precisely targets this valuable factor.

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Factor-Based Investing Q&A

What is factor-based investing?

Over the past 50 years, research shows that virtually all outperformance in the stock market has been driven by factors*. Investors create factor investments by grouping stocks with similar characteristics such as quality, size, momentum, dividend yields, low volatility and value.

Is factor-based investing the same as smart beta?

Smart beta has become the industry catch-all term for investment strategies that use alternatively weighted approaches, unlike traditional products weighted by market capitalization. While many smart beta products target equity factors by weighting certain underlying company characteristics, they can be inefficient. The best factor-based investing strategies target intended factors, while controlling for unintended risks, to deliver the most efficient factor exposure possible.

*Carhart, Mark M. "On persistence in mutual fund performance." The Journal of Finance 52.1 (1997): 57-82.

 

Smarter in 60 Seconds

    Bob Browne, CFA

    Bob Browne, CFA

    Chief Investment Officer
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    Bob Browne, CFA

    Bob Browne, CFA

    Chief Investment Officer
     

    Bob Browne is an Executive Vice President and Chief Investment Officer for Northern Trust. He is a member of Northern Trust's Operating Group, reporting directly to the Management Group.

    Bob chairs the firm’s Investment Policy Committee, which sets investment policy for all Northern Trust groups in all asset classes. He is responsible for investment performance, process and philosophy across multiple investment strategies including fixed income, active equity and passive investments. Bob joined Northern Trust in January 2009 and has more than 20 years of investment experience.

    From 2004 until 2009, Bob worked for ING Investment Management and was the firm’s Chief Investment Officer for Fixed Income and Proprietary Investments. In this capacity, he oversaw $120 billion in assets under management across retail and institutional clients, as well as the firm’s own insurance assets. From 2002 to 2004, Bob was founder and Managing Partner of Picador Capital, an alternative investment firm. From 1999 to 2001, he was Co-Head of Americas Fixed Income for Merrill Lynch Investments and he also worked in the firm’s London office from 1997 to 1999 as a senior portfolio manager. Bob spent the first eight years of his career, from 1989 until 1997, at JP Morgan Investment working as a global fixed income and currency portfolio manager in the firm’s Tokyo and London offices.

    Bob holds a B.A. with a major in economics from the College of the Holy Cross. He also has a Masters in international business studies from the University of South Carolina. Bob is a holder of the right to use the Chartered Financial Analyst® designation.

    Andrew Knell, CFA

    Andrew Knell, CFA

    Senior Investment Strategist, Global Equity
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    Andrew Knell, CFA

    Andrew Knell, CFA

    Senior Investment Strategist, Global Equity
     
    Andrew Knell is a Senior Vice President and senior investment strategist for Global Equity at Northern Trust Asset Management. The Global Equity Strategy team collaborates with investors to provide the optimal path to achieving their investment objectives. The team provides investment thought leadership to investors globally and is responsible for developing comprehensive investment solutions and insights across the spectrum of index, quantitative, and active strategies. Andrew also has an active role in working with clients to design ESG and responsible investment solutions.

    Prior to joining Northern Trust in 2014, Andrew was with Russell Investments in London where responsibilities included managing Russell Indexes’ European client base of buy-side managers, sell-side banks and ETF issuers, and acting as a product specialist for equity indices and smart beta. Previously in his career at Russell Investments, Andrew was responsible for asset management business development and client relationship management for institutional investors and strategic distribution partners. Andrew started at Russell Investments in 2005 with responsibility for developing and managing Russell’s fund management range in EMEA. Prior to Russell, Andrew started his career working at a small boutique financial consultancy.

    Andrew holds a first class bachelors degree in Cognitive Science from the University of London. He is a holder of the right to use the Chartered Financial Analyst designation, and also holds the Investment Management Certificate (IMC). He is a member of the CFA Society United Kingdom and the CFA Institute.

    More Insights

     

    Smart Beta Can Carry Unintended Risks
    Are investors setting themselves up for disappointment?
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    Periodic Table of Factors
    No one factor consistently outperforms over time
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    Factor Investing: Not Which, But When
    When should certain factors be favored?
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    Webinars

     


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    Factor-Based Solutions

     
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