Factor Investing and Smart beta


The topic of factor investing has been hard to ignore in the last few years, as many new products, also termed smart beta, have been launched with the aim of achieving higher returns at lower fees. Factor investing strategies cover a broad range of capabilities and approaches, and in theory provide an appealing framework for sustainable excess premiums, but is this framework a magical solution to a long-standing market efficiency problem for investors?


Mercer has advised on factor investing for several years, and in this paper, we revisit factor investing as a framework for long-only equity investing.  We consider the benefits and challenges that go hand in hand as investors seek to intelligently capture returns with the hope of added transparency and control over risk. 




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