There’s a chart on factor investing that I love to use for investor presentations, but I’ve been cautioned many times not to. I’ve heard it’s “too busy” or “too confusing,” and while I totally understand that feedback, I still love it – and I think it works. To me, it’s the most powerful and succinct way to explain why money managers should emphasize factor investing (and all you have to do is follow the colors of the boxes; the words aren’t even necessary to know).
The chart (below – click to enlarge) shows what we at CLS deem the “Big Six Equity Factors” on the basis of a calendar year going back 25 years. It is prepared by iShares, and the equity factors used have been studied and white-papered by MSCI.