While it is true that institutional investors often choose multi-factor strategies designed to outperform in all market conditions, it would be fair to say that the underperformance of the value factor has been a powerful headwind for quants. One can but hope, says Gideon Smith, co-chief investment officer of AXA Investment Managers’ Equity-QI, that the above is good news for quant managers, and that the present environment is one where they can thrive. Growth-oriented factors took a beating, while ‘quality’ factors such as return on equity, net profit margin and earnings growth stability – as defined by Investment Metrics – also performed well. Investment Metrics, the analytics provider formerly known as Style Analytics, reports that in April factors such as book to price, earnings yield, cash-flow yield, sales to price and EBITDA to EV, recorded positive performances in the US and Europe, as did stocks with a high dividend yield and dividend growth over five years. Gross returns for the MSCI World Value index, for instance, were -5.38% from January to April, compared with -12.89% on the MSCI World index. The uncertain prospects for the global economy, caused by two years of extraordinary difficulties, have led investors to shed growth stocks and bet on value, ending over a decade of underperformance of the value factor.Įquities have performed badly across the board this year, but value stocks have contained losses. It took a global pandemic, a war in Europe and the ensuing economic damage, but in the end, the long-awaited comeback of the value factor finally happened. The cost of using alternative data can be extremely high.From text-based data to satellite imaging, managers are finding additional sources of alpha and sustainability information.The use of alternative data to improve on quant strategies is growing.The value factor has started to outperform.