Blending several equity factors into one fund can be difficult to pull off in terms of capturing the intended effect. A good example/microcosm from Friday with the Invesco S&P 500 Multi-Factor ETF (QVML). The ticker symbol tells you the factors; quality, value and momentum for large cap stocks.
The first three fund target quality, value and momentum respectively. I did a quick review of QVML in March. The combo of quality, value and momentum is intriguing and has had the tendency to outperform market cap weighting but when I wrote about the fund in March I noted that it's huge weighting to tech wouldn't allow it to differentiate a whole lot.
The above chart is very short of course, below is 2022.
For 2022, using three separate funds worked much better than QVML.
For the longer period, the three individual funds blended together lagged SPY and QVML because it owns less tech than SPY and QVML. Is any of this worth it? That's up to the individual of course but for anyone trying to diversify at the factor level, a multi-factor fund might not be the answer.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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