Asset Allocation and Factor Investing

featuring Mark Kritzman

On Tuesday, May 15th we hosted a special webinar featuring Windham CEO and asset allocation expert, Mark Kritzman.

Asset allocation and factor investing are often seen as conflicting approaches to portfolio construction. Historically, most investors composed portfolios from broad asset classes, but now a growing constituency of investors is looking to factors as the building blocks of portfolios.

Those who choose to build portfolios from asset classes argue that they are easy to observe and are easily investable—unlike factors. Investors who prefer to allocate to factors argue that asset classes are defined arbitrarily and do not capture the fundamental determinants of performance as effectively as factors do. In addition, some investors prefer to invest in factors because they believe that factors carry risk premiums that are not directly available from asset classes.

In this webinar, Mark Kritzman presented a unique way that for investors tointegrate these two approaches to portfolio construction. Mark showed a framework for combining asset allocation with factor investing, which has the dual benefits of allocating to observable and directly investable asset classes in a manner that tracks a preferred factor profile.