Multi Factor

A successful team in cricket is often about the composition of the team rather than the individual star player.

The relationship between single factor and multi-factor strategies is no different in this regard - the team is the combination of the individual factors into one multi-factor strategy. A factor can undergo prolonged periods of underperformance with disillusioned investors running out of patience before the benefit of exposure to that factor is reaped.

There is no right or wrong answer as to how many and which factors to include in a strategy, but all the benefits of diversification apply to factor investing as well. A multi-factor approach can offer diversification and smoothen the ride through the investment journey by harvesting multiple sources of returns.

The challenge of a multi-factor portfolio is to decide how many factors to include and what approach to take. The answers can be easily found in the investor preference and objectives themselves. Investors who prioritise returns over costs may prefer a portfolio strategy dominated by momentum, while those with a strong preference for stable, consistent returns may consider low volatility to be the foundation of their portfolio. When designing a strategy for an astute investor segment with higher risk tolerance, one may consider concentrated single factor strategies to be appropriate. On the other hand, when designing a strategy for a wide variety of investors, a multi-factor strategy may serve the purpose best.

Value of Rs. 1,000 Invested

  • Source : Internal research, Bloomberg, National Stock Exchange
  • Calculations are for the period Oct 2002 to Aug 2022.
  • NJ Value 100, NJ Quality 100, NJ Momentum 100, NJ Low Volatility 100 and NJ Multi-Factor 100 Portfolios are proprietary methodologies developed by NJ Asset Management Private Limited. The methodologies will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  10-Yr Rolling Return (%) 10 Yrs Volatility (%)
Return to Risk Ratio (x) Drawdown (%)
NJ Multi-Factor 100 Portfolio 19.05 5.45 3.50 56.57
Nifty 500 TRI 13.39 6.54 2.05 63.71
  • Source: Internal research, Bloomberg, National Stock Exchange.
  • Calculations are for the period Oct 2002 to Aug 2022.
  • NJ Value 100, NJ Quality 100, NJ Momentum 100, NJ Low Volatility 100 and NJ Multi-Factor 100 Portfolios are proprietary methodologies developed by NJ Asset Management Private Limited. The methodologies will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.
  • Past performance may or may not be sustained in future and is not an indication of future return.

NJ Multi Factor 100 Portfolio vs Nifty 500 TRI - 10yrs Returns

  • Source: Internal research, Bloomberg, National Stock Exchange
  • 10-Yr CAGRs are calculated for the period 30 September 2002 to 31st August 2022 and have been rolled on a daily basis.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Multi-factor 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.
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