Harvesting value premia requires diligence and patience
November 19, 2020

Harvesting value premia requires diligence and patience

Bernhard Breloer. Portfolio Manager, Invesco Quantitative Strategies and Tim Herzig. Portfolio Management Associate, Invesco Quantitative Strategies

The global value factor has underperformed over a prolonged period. Against this background, we examine the current status of value as a single factor and building block in a multi-factor concept. We outline the importance of how the value factor is defined and constructed, and the consequences of this in the context of portfolio positioning and performance. Our view is to be thoughtful when building a value factor-based portfolio given the diverse set of variables that can be involved in harvesting the factor premium. Furthermore, the value factor can provide diversification and hence continues to play a significant role within a multi-factor framework. Finally, while value is currently being widely criticised, we draw attention to other factors which have been questioned in the past only to perform well again after periods of weak performance. To reap the benefits from long-term oriented factor strategies, one must be diligent in their implementation and patient in their pursuit.

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