Has Factor Building Been Overdone? Assessing Tradeoffs in Systematic Strategies
Jeromey Thornton, CFA - Avantis Investors
Financial science and our understanding of what drives asset prices have evolved considerably. The implications of the financial services industry have also been significant, including the introduction of passive index funds, single-factor and multi-factor strategies. Recent studies have highlighted that the rise in indexing and has been driven by asset class segment, or non-total market index funds. While index-based strategies offer transparency in exposures, any non-total market index involves active decision making in both design and ongoing execution. During this session we will:
- Examine some of the similarities and differences in how indexes define asset classes and manage reconstitution.
- Contemplate whether factor-building has been overdone and examine the risks of becoming to factor focused.
- Highlight some of the constraints these decisions can place on index trackers.
- Propose how a systematic approach can deliver benefits commonly associated with indexing while removing artificial constraints.
Speaker bio: Jeromey is a senior investment director at Avantis Investors®. In this role, Jeromey meets with advisors and institutions to discuss investment topics and explain Avantis’ investment capabilities. He also directs and coordinates content development surrounding Avantis’ investment approach and solutions. Prior to joining Avantis Investors, Jeromey was the head of product management at Dimensional Fund Advisors, where he led a global team responsible for promoting the value proposition of Dimensional’s approach and investment products through content development, direct client engagement, and distribution support. In this capacity, he oversaw product marketing and external communications for Dimensional’s entry into the ETF market. Prior to Dimensional, Jeromey was a management consultant at Deloitte Consulting helping clients solve complex business problems primarily within the financial services industry. Jeromey earned a bachelor of business administration in management information systems from the McCombs School of Business at The University of Texas at Austin. He is a CFA Charterholder and holds Series 7 and 66 licenses.
