Studies have shown that factor tilts add more portfolio alpha over time than manager selection. The concept was formalized and later expounded on by Eugene Fama and Kenneth French, who, in their three factor model, found that over the long term small stocks will outperform large stocks, and value will outperform growth. Since the model’s 1992 publication, new factors have been embedded into indexes and investment vehicles.
*Russell 1000 factor indexes used as performance proxies, index returns relative to the Russell 1000 index are used for alpha terms. Sources: Bloomberg LP; Northern Trust Asset Management; ETFGI; P&I Research Center; Morningstar
Compiled and designed by Charles McGrath and Gregg A. Runburg