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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

    Matt Peron

    Matt Peron

    Managing Director, Global Equity
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    Matt Peron

    Matt Peron

    Managing Director, Global Equity
     

    Matthew Peron is an Executive Vice President and Managing Director of Global Equity at Northern Trust in Chicago.  
     
    Most recently, Matt served as Director of Active Equity with responsibility for fundamental, quantitative, and tax-advantaged strategies. Prior to that role, Matt was the Director of Equity Research. In addition, Matt has lead-managed several investment strategies while at Northern Trust.  

    Prior to joining Northern Trust in 2005, Matt was the Deputy Chief Risk Officer for Alliance Capital Management. Previous experience includes equity portfolio management at Lincoln Capital Management. Matt has been in the financial industry since 1990 when he started his career on Wall Street.  

    Matt earned an MBA from the University of Chicago and a B.S. in electrical engineering from Swarthmore College.

    Andrew Knell

    Andrew Knell

    Investment Strategist, Global Equity
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    Andrew Knell

    Andrew Knell

    Investment Strategist, Global Equity
     
    Andrew Knell is a Vice President and 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, engineered, and active equity strategies. Andrew also has an active role in working with prospective and current clients to design and implement environmental, social and governance (ESG) investment solutions.

    Prior to joining Northern Trust in 2014, Andrew was with Russell Investments in London. His 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. Earlier 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 was also previously responsible 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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