Morningstar - A Framework for Analyzing Multifactor Funds

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matjen
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Morningstar - A Framework for Analyzing Multifactor Funds

Post by matjen » Mon Jun 11, 2018 8:56 am

Morningstar has just come out with a paper on Multifactor Funds along with some recommendations. Per usual, AQR and DFA are represented but there are also some funds that anyone can purchase that may also be of interest.

For instance,

DEUS Xtrackers Russell 1000 Comprehensive Factor ETF at 17 bps.
LRGF iShares Edge MSCI Multifactor USA ETF at 20 bps

https://corporate1.morningstar.com/Rese ... tor-funds/
Executive Summary
The case for multifactor funds is essentially the case for diversification, which Nobel Memorial Prizewinning
economist Harry Markowitz has described as the only “free lunch” in investing. Investors
shouldn’t put all their “eggs” in one factor. But just because the argument for factor diversification is
simple doesn’t mean that selecting and sticking with a multifactor strategy is easy. In fact, in light of the
proliferation of multifactor funds, choosing from the now-expansive menu is becoming more difficult by
the day. In this paper, we take a closer look at the case for spreading factor bets, provide a framework to
help investors navigate the multitude of multifactor funds, and profile a select set of the funds to bring
this checklist to life.
A man is rich in proportion to the number of things he can afford to let alone.

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