Quant Finance

In a new study entitled “Factor Investing: A Welfare-Improving New Investment Paradigm or Yet Another Marketing Fad?”, drawn from the Lyxor research chair on “Risk Allocation Solutions”, EDHEC-Risk examines the relative efficiency of standard forms of practical implementation of the factor investing paradigm based on commonly used factors in the equity, fixed-income and commodity universes.

Lyxor Asset Management has continued its growth momentum, recording a 7% increase in AuM since the end of 2013 thus reaching EUR 86bn of assets under management.

Since mid-2011, CTAs cumulative loss is between -10.6% (HFRI macro systematic index) and -16.8% (Credit Suisse Managed Futures Index). For the first quarter of this year, CTAs show a drawdown of about 3% which is expected to increase in April (-0.66% for HFRX CTA index) ...

Penalised at the peak of the European debt crisis by highly correlated and non-trending markets, trend-following funds have retained their unrivalled ability to improve the efficiency of an investment portfolio. Better consideration of the issues associated with risk allocation will strengthen these strategies’ potential going forward.

The survey finds that LDI is popular, but in concrete terms the fund separation approach, which is consistent with the LDI paradigm, is not yet sufficiently widely applied to manage the LDI approach optimally, especially in southern European countries.