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Employing Style Rotation with MSCI’s Systematic Equity Strategy Factors

The rise of factor investing and smart beta has made timing factors more relevant than ever. As active investors look for ways to differentiate their strategies from their competition, factor rotation may be another technique to explore.  In this Product Insight, we test style factor rotation methods using the Systematic Equity Strategy (SES) factors modeled by MSCI Equity Analytics Research. Using simulated history, our study found it was possible to anticipate Risk-On and Risk-Off regimes by employing a signal from the Barra risk models. Tilting a strategy towards factors that provided benefits within each regime resulted in a 7.8% annualized return above the MSCI ACWI.

 


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