Yep, factor investing is somewhere between active and passive investing:
However, factor investing has taken off in recent years along with passive investing, though not nearly at the same torrid pace, as the shift away from actively managed equity funds continues.
“Passive and factor investing are joined at the hip,” said Samuel Lee, an analyst at Morningstar Inc.
“Passive is based on a lot of academic and finance theory that says it’s impossible to beat the market. Factor investing is an offshoot of that,” Mr. Lee said.
“Factor investors probably started off as Bogle-style buy-and-hold investors, then looked deeper into the research,” he said, referring to The Vanguard Group Inc. founder John Bogle.
The research shows that over time, overweighting companies with favorable prices, profitability, size or momentum can lead to better overall risk-adjusted returns. The key to that, though, is time.
Source: Investment News
Factor investing is passive in its systematic execution, transparency, and relatively low cost and active in its design to be built around return factors that have demonstrated the possibility of outperforming cap-weighted indexes over time.
HT: Abnormal Returns
