Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

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vineviz
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Re: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

Post by vineviz » Tue Dec 18, 2018 8:55 am

Park wrote:
Mon Dec 17, 2018 11:33 pm
There are literally hundreds (thousands?) of hedge fund that are very aware of small value tilts. DFA has about $600 billion in assets, and from what I can see, tilts to small and value play an important role in how those assets are invested. At the level of the retail investor, this board shows that such tilts are not unpopular. My perception is that the interest in small growth investing is not equal to that of small value investing.
I suspect this perception is shaped by the nature of people who choose to frequent this forum.

According to Morningstar there are 122 small cap value mutual funds, with total assets of $123 billion. There are 197 small cap growth funds, with total assets of $201 billion.

There are still many more people chasing the next "hot" growth stocks than "boring" value stocks, but those growth stock investors aren't hanging out with the Bogleheads.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Park
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Re: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

Post by Park » Tue Dec 18, 2018 7:16 pm

vineviz wrote:
Tue Dec 18, 2018 8:55 am
Park wrote:
Mon Dec 17, 2018 11:33 pm
There are literally hundreds (thousands?) of hedge fund that are very aware of small value tilts. DFA has about $600 billion in assets, and from what I can see, tilts to small and value play an important role in how those assets are invested. At the level of the retail investor, this board shows that such tilts are not unpopular. My perception is that the interest in small growth investing is not equal to that of small value investing.
I suspect this perception is shaped by the nature of people who choose to frequent this forum.

According to Morningstar there are 122 small cap value mutual funds, with total assets of $123 billion. There are 197 small cap growth funds, with total assets of $201 billion.

There are still many more people chasing the next "hot" growth stocks than "boring" value stocks, but those growth stock investors aren't hanging out with the Bogleheads.
I've read on this board that Vanguard Small Growth has a slight value tilt. The people who sell small growth funds are well aware of factor investing. If Vanguard does it, so will others.

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vineviz
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Joined: Tue May 15, 2018 1:55 pm

Re: Do Factor Tilts, Such As Small Value, Increase Idiosyncratic Risk?

Post by vineviz » Tue Dec 18, 2018 7:44 pm

Park wrote:
Tue Dec 18, 2018 7:16 pm
vineviz wrote:
Tue Dec 18, 2018 8:55 am
Park wrote:
Mon Dec 17, 2018 11:33 pm
There are literally hundreds (thousands?) of hedge fund that are very aware of small value tilts. DFA has about $600 billion in assets, and from what I can see, tilts to small and value play an important role in how those assets are invested. At the level of the retail investor, this board shows that such tilts are not unpopular. My perception is that the interest in small growth investing is not equal to that of small value investing.
I suspect this perception is shaped by the nature of people who choose to frequent this forum.

According to Morningstar there are 122 small cap value mutual funds, with total assets of $123 billion. There are 197 small cap growth funds, with total assets of $201 billion.

There are still many more people chasing the next "hot" growth stocks than "boring" value stocks, but those growth stock investors aren't hanging out with the Bogleheads.
I've read on this board that Vanguard Small Growth has a slight value tilt. The people who sell small growth funds are well aware of factor investing. If Vanguard does it, so will others.
You’ll read lots of things on this board about risk factors that you should pay little attention to.

Small cap stocks tend to have lower valuations than large cap stocks, and if you don’t account for that then many small cap growth funds do show a minor positive load on “value”. That’s not part of the strategy or the marketing, and virtually no small cap growth fund manager I’ve worked with would cross the hallway to intentionally add a value tilt to their portfolio.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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