How to Invest Like Buffett but via Factors

As the debate continues concerning how quantitative model performance compares to that of active funds, a Bloomberg article from earlier this month discusses the findings of an AQR study that suggest how some quant models could generate returns that approximate those of legendary fund managers. AQR Capital Management, as described in the article, is a “program-driven investment firm whose founders made their names finding the math behind investment success.” The firm’s study compared the investment results of Warren Buffett, George Soros and others with those of “portfolios automatically tuned to investment styles deemed consistent with their philosophies, and found the […]

Valuations Matter in Factor Strategies

It’s a familiar investment conundrum: when a strategy outperforms and more investors pile in, it can get more expensive and therefore be less likely to outperform going forward. This is discussed as it relates specifically to factor investing in a recent Morningstar article. Alex Bryan, CFA, director of passive strategies research (North America) for Morningstar, poses the question: “What if the apparent performance edge is not sustainable and investors are just relapsing into counterproductive performance-chasing?” He offers support for related research results published by Rob Arnott and his colleagues at Research Affiliates. Arnott, says Bryan, “argues that valuations matter, and […]