In the 47th episode of OppenheimerFunds’ World Financial Podcast, Brian Levitt and Drew Thornton are joined by Mo Haghbin, Head of Product, Beta Solutions at OppenheimerFunds, and Alessio DeLongis, Portfolio Manager for OppenheimerFunds Global Multi-Asset Group, to discuss multifactor strategies.
Below are a few highlights from the episode:
[7:30] Breaking Down the Strategy: Haghbin highlights the different approaches to factors and the innovative strategy built at OppenheimerFunds. “We're looking at an individual company’s characteristics from the bottom up; value, momentum, quality, low volatility, size, and we're bringing them together in the portfolio using some of the signals that our multi-asset team generate, specifically leading economic indicators in our global risk appetite model,” Haghbin says. By using macroeconomic information, Haghbin and DeLongis can extract relevant information about asset prices and economic growth.
[14:00] Finding and Using Economic Information: The disconnect in growth between the U.S. and the rest of the world signaled a slowdown for U.S. asset prices, according to DeLongis. They determine these trends by looking at leading economic indicators, which provide a glance into near-term economic activity. “We're not forecasting anything. We're just looking at a combination of realized economic data that we believe have some forward-looking component to it,” DeLongis says. These data sources are widely trusted by academics, industry leaders, and other multilateral organizations like the International Monetary Fund (IMF).
[18:00] Getting the Most from Data: So how does the strategy avoid false signals? “We put some thresholds in place so that we're not necessarily moving the portfolio unless we get a strong signal that there's a change in the overall macroeconomic environment, or capital markets are telling us that there may be some changes in the health of the economy,” according to Haghbin.
[28:00] What Can Move the Model: The strategy continues to process the decoupling of emerging markets, developed markets, and the U.S. economy. A move is only made if something significant changes in the global economy and markets. And since the model uses a culmination of global factors, it can anticipate a movement before a model that relies on only U.S. indicators. DeLongis believes many different political or economic events could shift the positioning of factors.
[32:00] Factor Investing Landscape: The broad factor landscape consists of many different strategies with billions of assets under management. So how does OppenheimerFunds differentiate themselves? Most strategies equally weight each factor while the OppenheimerFunds multifactor strategies rotate between them. What’s more, other products do not look at the same signals or incorporate the macro information in the evaluation process, according to Haghbin.
For more, listen to Episode 47 of the World Financial Podcast, Factor Investing: Capitalizing on a Slowdown
Mutual funds and exchange traded funds are subject to market risk and volatility. Shares may gain or lose value. Exposure to investments based on the following factors: value, momentum, quality, low volatility and size, and to weight such factors based on changes in the economic cycle. There can be no assurance that doing so will enhance performance over time.
These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.