Factors and Advisors Portfolios

41 Pages Posted: 2 Aug 2019

See all articles by Brian Lawler

Brian Lawler

BlackRock, Inc

Andrew Ang

BlackRock, Inc

Brett M Mossman

BlackRock, Inc

Patrick Nolan

BlackRock, Inc

Date Written: July 15, 2019

Abstract

In the approximately 10,000 advisor portfolios that we analyze at the security level, we find there are large common patterns and significant exposures to just a few factors. Advisor portfolios are heavily exposed to economic growth, which is mostly accessed through equities, and could obtain better factor balance by including other diversifiers. Within equities, the only significant style exposure is small size; advisors, in general, can potentially improve returns by harvesting other rewarded style factors. In fixed income, advisor portfolios veer towards shorter duration which can be lengthened in an effort to provide more resilience against economic downturns. Finally, the average advisor fee is 0.54% across all portfolios, but with a wide range from 0.14% to 0.96% at the 5th and 95th percentiles, respectively. These fees, however, do not correlate highly with absolute levels of risk, active risk, or the number of positions—implying large scope to obtain greater efficiencies in taking active risk within a given fee budget.

Keywords: portfolio, factors, risk premia, risk

JEL Classification: G11

Suggested Citation

Lawler, Brian and Ang, Andrew and Mossman, Brett M and Nolan, Patrick, Factors and Advisors Portfolios (July 15, 2019). Available at SSRN: https://ssrn.com/abstract=3428723 or http://dx.doi.org/10.2139/ssrn.3428723

Brian Lawler (Contact Author)

BlackRock, Inc ( email )

55 East 52nd Street
New York City, NY 10055
United States

Andrew Ang

BlackRock, Inc ( email )

55 East 52nd Street
New York City, NY 10055
United States

Brett M Mossman

BlackRock, Inc ( email )

55 East 52nd Street
New York City, NY 10055
United States

Patrick Nolan

BlackRock, Inc ( email )

55 East 52nd Street
New York City, NY 10055
United States

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