Tailoring Multi-Asset Multi-Factor Strategies

Risk & Reward, 2018, 1st issue, pp. 18-23

8 Pages Posted: 12 Jun 2018

See all articles by Joo Hee Lee

Joo Hee Lee

Invesco

Harald Lohre

Invesco; Centre for Endowment Asset Management, Cambridge Judge Business School, University of Cambridge; Centre for Financial Econometrics, Asset Markets and Macroeconomic Policy, Lancaster University Management School

Jay H Raol

Invesco

Carsten Rother

Invesco; University of Hamburg

Date Written: May 8, 2018

Abstract

To sharpen the top-down allocation perspective of their investments, investors are keen to identify and manage the most salient drivers of risk and return. For many years, the focus was on traditional market risks, such as equity, duration or credit risk. This framework can be considerably advanced when examining a given investment through the factor investing lens, which accounts for style factors, such as carry, value, momentum and quality. We put forward a variety of approaches, ranging from the traditional multi-asset allocation to factor-based tail-hedging, factor completion and a fully diversified multi-asset multi-factor proposition.

Keywords: Style Factors, Factor Investing, Factor Completion, Maximum Diversification, Risk Parity

JEL Classification: G11, D81

Suggested Citation

Lee, Joo Hee and Lohre, Harald and Raol, Jay H and Rother, Carsten, Tailoring Multi-Asset Multi-Factor Strategies (May 8, 2018). Risk & Reward, 2018, 1st issue, pp. 18-23. Available at SSRN: https://ssrn.com/abstract=3175274

Joo Hee Lee

Invesco ( email )

An der Welle 5
Frankfurt am Main, 60322
Germany

Centre for Endowment Asset Management, Cambridge Judge Business School, University of Cambridge

Cambridge
United Kingdom

HOME PAGE: http://https://www.jbs.cam.ac.uk/faculty-research/centres/ceam/

Centre for Financial Econometrics, Asset Markets and Macroeconomic Policy, Lancaster University Management School

Bailrigg
Lancaster LA1 4YX
United Kingdom

HOME PAGE: http://www.lancaster.ac.uk/lums/research/research-centres/financial-econometrics/

Jay H Raol

Invesco ( email )

An der Welle 5
Frankfurt am Main, 60322
Germany

Carsten Rother

Invesco ( email )

An der Welle 5
Frankfurt am Main, 60322
Germany

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

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