Category Archives: Single Factor Strategies

Single Factor Strategies – Example Dividend Strategy Mandate

If a client wishes to entrust me with a Single Factor Strategy – Dividend mandate the first step would be to choose a current dividend yield and market(s) he would like to target. I would then analyse the current dividend yield, the historic dividend yield and then compile a portfolio, taking into account his investment horizon, diversification aspects, liquidity requirements and market cap. Periodic reviews would then follow, either at the date of the AGM and or the publication of financial results.

In the graph below an example for how the selection process would work if the client had a target dividend yield of 3%. All those companies above the threshold (red line) would be in the pot of possible inclusions. The arrows depict which companies are improving the dividend versus 2013.

Single-factor-mandates-swiss-equities-graph-dividend-1Also see this post for other Single Factor Strategies I can implement for you.

 

Single Factor Strategies – Swiss Equity Mandates

Here’s a list of single factor strategies that I can implement for Swiss Equity mandates:

  1. Low Volatility
  2. High Beta
  3. Momentum
  4. Dividend
  5. Quality

Note:

  • certain of these strategies can or will lead to high turnover
  • certain of these strategies should  be used in a complimentary fashion to an existing core portfolio by preference
  • these strategies provide investors with passive, rule-based exposure while retaining the possibility to generate excess returns when compared to a cap-weighted benchmark index.

Passive Cap Weighted vs Passive Smart Beta vs Active

smart-beta

Single Factor Strategies explained

Low Volatility
Employs volatility rankings while seeking to minimize the effects of market fluctuations.

High Beta
Employs beta-weighted method to increase exposure to benchmark moves without using leverage.

Momentum
Securities are ranked relative to peers using RSI (relative strength methodology) to identify the strongest and weakest investment trends.

Dividend
Ranks the companies by their dividend yield while seeking to increase overall portfolio yield and potential for better price performance.

Quality
Focuses on companies that have an S&P quality ranking of A- or above and have historically exhibited higher sharpe ratios and lower volatility.