On the occasion of the recent launch of Avantis UCITS ETFs in Europe, I started watching more of your videos on factors to decide whether a factor tilt is for me. I watched your latest video with Dr Sunil Wahal yesterday, who made a very compelling point that combining different factor ETFs is inappropriate. His rationale was that some factors are inversely related (such as value and profitability), and so by combining different factor ETFs you might reduce your overall exposure to factors to zero. Instead, he insisted on using ETFs that target a joint distribution of value and profitability (as Avantis does). This is in contrast to Antonio Picca from Vanguard, who claims at the end of the video that multi-ETF factor strategies are preferable. Also, Dr Wahal raised the point that the "quality" factor is more or less a marketing term (gimmick), but Antonio Picca and Vanguard use this term. Overall, I tend to agree with Dr Wahal (and, consequently, with Avantis), but I would like to hear your opinion on that! Thanks for all the useful content in your podcast.
Thank you guys for your insights. I hope Vanguard will bring their factor-funds to Europe again some day. I always hesitated to invest as they were barely above 100M in volume. Sadly I was right not to invest.
To provide extra context to anyone reading this, there is neither many factor funds in Europe's UCITS space nor enough demand for factor funds to support many in the space.
@@mattlm64 the small cap value funds from iShares come with a large negative alpha though. The expected "outperformance" is limited. You can test this for yourself by running a five or six factor regression.
After looking at numerous strategies and portfolios, it's hard not to wind up just investing in VTI/VXUS, especially if you have multiple asset classes and thus your equity allocation is 70% or below. When I look at these alternative strategies, I'm usually better off just increasing my vanilla index allocation by 5% (via VTI/VXUS), rather than trying to find a better equity mousetrap. Personally, I like the idea of a better mousetrap, but I think Buffet might be right.
Great episode, I am investor in DFA835 through PWL and confess to having lost trust when the DFA funds where outperformed by equivalent non factor based ones for multiple years in a row. Having Ben to remind me of the philosophy of factor based investing helped me not rush into a decision and wait to judge the DFA funds when small cap factor shows up as Antonio said. Curious to see if PWL will offer multi factor Vanguard based portfolios.
Thanks for the super interesting video. How would the fund structure that Ben proposed in the second last question differ from products like the iShares Edge MSCI World Multifactor ETF?
I’m curious to see if the topic of factor investing for Canadian investors arises in this conversation. I’d love to factor tilt my portfolio, but am holding off until I’m able to do so without performing currency conversions.
There's a pretty good discussion of "quality" as a marketing term around the 19 min mark of episode #149 with Robert Novy-Marx. The actual Fama-French factors that might be relevant are profitability and investment; quality is what they use as a label.
It's so confusing that the wider meaning of value is "value investing" ie, very solid long term not very volatile safe stocks, but here value is riskier.
Oftentimes differences in performance are attributed to the performance(or lack of performanc) of the individual factors they are exposed to during the period
On the occasion of the recent launch of Avantis UCITS ETFs in Europe, I started watching more of your videos on factors to decide whether a factor tilt is for me. I watched your latest video with Dr Sunil Wahal yesterday, who made a very compelling point that combining different factor ETFs is inappropriate. His rationale was that some factors are inversely related (such as value and profitability), and so by combining different factor ETFs you might reduce your overall exposure to factors to zero. Instead, he insisted on using ETFs that target a joint distribution of value and profitability (as Avantis does). This is in contrast to Antonio Picca from Vanguard, who claims at the end of the video that multi-ETF factor strategies are preferable. Also, Dr Wahal raised the point that the "quality" factor is more or less a marketing term (gimmick), but Antonio Picca and Vanguard use this term. Overall, I tend to agree with Dr Wahal (and, consequently, with Avantis), but I would like to hear your opinion on that! Thanks for all the useful content in your podcast.
Thank you guys for your insights. I hope Vanguard will bring their factor-funds to Europe again some day. I always hesitated to invest as they were barely above 100M in volume. Sadly I was right not to invest.
To provide extra context to anyone reading this, there is neither many factor funds in Europe's UCITS space nor enough demand for factor funds to support many in the space.
The SPDR small cap value US and Europe funds are a reasonable choice for now and iShares has a few options.
@@mattlm64 the small cap value funds from iShares come with a large negative alpha though. The expected "outperformance" is limited. You can test this for yourself by running a five or six factor regression.
@@chengskwatalot3190 I didn't think iShares did SCV? Unless you mean the SPDR funds which have reasonable regressions when I looked previously.
I was so happy when I saw the new episode in my feed :D
Great conversation! Hoping for Vanguard to bring back Factor funds into the EU.
Credit to Ben for having vanguard on his podcast given his relationship with DFA. Credit you Ben/team.
We have had Avantis, AQR, Alpha Architect, iShares, and RAFI on the podcast. Maybe others I am forgetting.
-Ben
This is world class! Thanks for putting out the great work for free, Ben!
After looking at numerous strategies and portfolios, it's hard not to wind up just investing in VTI/VXUS, especially if you have multiple asset classes and thus your equity allocation is 70% or below. When I look at these alternative strategies, I'm usually better off just increasing my vanilla index allocation by 5% (via VTI/VXUS), rather than trying to find a better equity mousetrap. Personally, I like the idea of a better mousetrap, but I think Buffet might be right.
How this channel does not have more subs is beyond me.
Shame Vanguard UK closed their Factor ETFs 😠
Great episode, I am investor in DFA835 through PWL and confess to having lost trust when the DFA funds where outperformed by equivalent non factor based ones for multiple years in a row. Having Ben to remind me of the philosophy of factor based investing helped me not rush into a decision and wait to judge the DFA funds when small cap factor shows up as Antonio said. Curious to see if PWL will offer multi factor Vanguard based portfolios.
"multiple years" factor strategy is long one 20 years +
When you said "For Canadians", my heart went broke
Great conversation. Thank you!
Thanks for the super interesting video. How would the fund structure that Ben proposed in the second last question differ from products like the iShares Edge MSCI World Multifactor ETF?
I’m curious to see if the topic of factor investing for Canadian investors arises in this conversation. I’d love to factor tilt my portfolio, but am holding off until I’m able to do so without performing currency conversions.
Anyone know of where I can buy these two funds?
1) small cap except not including unprofitable
2) value except not including high debt
So disappointed when vanguard pulled a number of their factor funds in the UK. Really poor
Great podcast!
Looking forward to Vanguard UK bringing in their Factor and better still a Small Cap Value fund
Vanguard have pulled their factor ETFs. ishares is the leading factor ETF provider for UK investors
Where is the long term performance advantage with factor investing?
Could you guys discuss the "Quality" factor in the future please?
There's a pretty good discussion of "quality" as a marketing term around the 19 min mark of episode #149 with Robert Novy-Marx. The actual Fama-French factors that might be relevant are profitability and investment; quality is what they use as a label.
Incase you missed it, this is discussed in Episode 154 with Professor Novy-Marx : The Other Side of Value.
@@FFAs Ah. It has been some time. I may need to revisit that episode then.
@@GhettoFabulousLorch I revisited it myself recently! Lots of information in these, making it well worth it imo
@@FFAs Too true. A good lot of these could be listened to more than once. I wouldn't mind if they collated notes over time and revisited topics.
It's so confusing that the wider meaning of value is "value investing" ie, very solid long term not very volatile safe stocks, but here value is riskier.
factor investing is just nothing vanguard stands for. i like the ideas around it but i like that vanguard decides to cancel them.
Why has Vanguard's factor funds done so much worse than other factor funds?
example?
Oftentimes differences in performance are attributed to the performance(or lack of performanc) of the individual factors they are exposed to during the period