The Future of Factor Investing

In this article, the author discusses current structural research and investment trends that are shaping the future of factor investing. Specifically, the author focuses on three emerging trends: the ongoing evolution of traditional factor models and strategies, recent innovation in data sources and modeling techniques, and the potential disruption from integrating factor strategies into the asset allocation process. Key Findings ▪ Factor models and strategies evolve gradually over time, reflecting the evolution of capital markets and advances in academic theory, data availability, empirical research, and investment practice. ▪ Current innovation efforts in factor investing focus on exploiting new unstructured data sources, applying new data science modeling techniques, and integrating sustainability and climate factors. ▪ Innovation in factor investing is reshaping the traditional asset allocation paradigm by creating new opportunities for investors to express active investment views through a factor allocation process.