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Matt Zenz

Podcast: Longview Research Partners on the Latest in Evidence-Based Investing

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Divesting the Drag of Lower-Expected-Return Securities

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Divesting the Drag of Lower-Expected-Return Securities

In portfolio management, implementation efficiency is a critical yet often under appreciated source of excess return.

Larry Swedroe

Larry Swedroe on Why Nimble ETFs May Have an Edge Over the Giants

Larry has long been a trusted voice in translating academic research into practical insights for advisors and their clients.

Matt Zenz

Podcast: Longview Research Partners on the Latest in Evidence-Based Investing

Matt Zenz appeared on the October 4 podcast episode of Excess Returns to discuss the case for evidence-based investing and the challenges that can accompany scale among the industry’s largest investment firms.

Premium Drag

Trading costs and delays in executing trades can significantly drag on returns for large asset managers, especially in small value stocks. Smaller, nimbler firms can avoid these issues by executing trades more efficiently, thereby better capturing the value premium.

Valuation Timing

While history tells us that value stocks tend to outperform growth stocks over time, the value premium can’t be reliably timed. However, by adjusting the tilt toward value based on valuation spreads, we believe that investors can potentially capture higher returns when spreads are wider and reduce tracking error when spreads are lower. In other words, take more value exposure when you are paid more for it.

Release the Constraints

Our research tell us that traditional style boxes, like those created by Morningstar, limit investment potential by imposing unnecessary constraints. We believe that by focusing on risk and return rather than rigid categories, investors can achieve more efficient outcomes to help meet their expectations.

The Momentum Catch 22

Evidence-based investors want exposure to a factor like momentum because it is a powerful driver of returns; capturing it effectively is typically challenging due to high trading costs and turnover. We believe that seeking a balanced approach that integrates momentum with other factors, especially at lower asset levels, can help capture the momentum premium without the excessive costs.