- 31 Dez.Vector 2021 Annual Review
- 15 Okt.Q3 Review
- 17 Aug.Chinese crackdowns
- 22 JuliVector 2021 Semi-Annual Review
- 25 JuniWhy we still like value
- 25 Mai'Transitory' Inflation
- 22 Apr.Reversal to the mean?
- 17 MärzVector's take on sustainable finance
- 09 MärzSustainability-related disclosures in the financial services sector (SFDR)
- 19 Feb.David versus Goliath: An analysis of 2020 stock market performance
- 30 Dez.Vector 2020 Annual Review
- 20 Nov.Factor momentum
- 20 Okt.How will the US elections influence your portfolio?
- 25 Sept.Are better times for quant investing on the horizon?
- 26 Aug.Fama/French going through its biggest drawdown since 1963
- 17 JuliVector 2020 Semi-Annual Review
- 25 JuniA Look At Post-Corona Market Valuations
- 25 MaiUnprecedented times call for unprecedented measures...
- 23 Apr.Vector's outlook on the Corona Crisis
- 13 MärzMarket correction: sense or sentiment?
- 17 Feb.The market and sector concentration
- 14 Jan.Notice to shareholders
- 31 Dez.Vector 2019 Annual Review
- 17 Dez.Fama/French going through its second biggest drawdown since 1963
- 15 Nov.The Alpha Lifecycle
- 16 Okt.Vector 2019 Q3 Review
- 10 Sept.A new prospectus
- 14 Aug.Market Review: July
- 10 JuliVector 2019 Semi-annual Review
- 14 JuniAre factor premia disappearing?
- 21 MaiHow persistent is regional outperformance?
- 12 Apr.Market recovery: sense or sentiment?
- 12 MärzMarkets solidify recovery
- 12 Feb.Stock Markets Rebound
- 31 Dez.Vector 2018 Annual Review
- 14 Dez.2019 (outrageous) predictions!
- 20 Aug.Temperatures and stock markets heat up
- 18 JuliVector 2018 Semi-annual Review
- 14 JuniDo exporters suffer during trade wars?
- 15 MaiStrong earnings put markets on the road to recovery
- 17 Apr.Q1 Overview
- 13 MärzStock Markets: Episode VI: The return of volatility
- 02 MärzVector wins Morningstar Germany and Belgium Awards!
- 22 Feb.Vector Flexible wins De Tijd/L'Echo Awards for the third year in a row!
- 16 Feb.Navigator wins Morningstar France Award!
The Quant Cycle
19 Apr. 2022
The first quarter of 2022 was difficult for equities as the Russian invasion of Ukraine unfolded and the increased likelihood of additional interest rate hikes dawned on investors. The MSCI All Countries index ended the quarter about 3.3% lower. The uncertainty about the supply of oil and gas caused basic materials to skyrocket, with the sector outperforming the index by more than 20% thus far. Technology stocks on the other hand struggled with central bankers’ more hawkish stance and as a sector had some of the worst performance year-to-date. As this shift unfolds, some of the best growth and momentum stocks are caught in a reversal movement which mainly benefits the value factor.
With some imagination you can see the ‘Quant Cycle’ unfolding. We like to refer you to the website and the very interesting paper written by the research department of Robeco. The quant cycle itself can be illustrated as follows:
In summary the findings are as follows:
- During normal stages (2/3 of the time) all factors show decent, positive alphas.
- The value factor experiences a major drawdown about every decade. Drawdowns in value historically tended to occur in bullish environments due to a growth rally - as we have seen lately - or in bearish environments due to a value crash, like during the financial crisis of 2008.
- Immediately following a crash of value there is a reversal in the pattern: growth loses big time and value makes a comeback. After the reversal stage is over, the factors return to their normal, long-term state.
If this analysis can be a guide for the future, this means good times for value-minded quant investors are on the horizon. And, despite difficult markets, we have seen a small taste of this within our own funds during 2022. Vector Navigator for instance is down just 1.7% during Q1, outperforming its peers by 2.9% year-to-date. Vector Flexible, which currently hedges about 45% of the market risk, has only lost 0.04% so far. The fund outperformed the Morningstar category by approximately 4.2% during the first quarter. This outperformance can in part be explained by a successful stock selection and in part by our hedging mechanism, which works extremely well in times of increasing interest rates as the duration risk encased in the strategy is minimal compared to most of our bond-heavy peers.
Werner, Thierry & Nils