In this edition of our paper, we present the performance of key factors during the current Global Virus Crisis (GVC) and place this in context of previous stressed market periods. Foresight factor premium analysis focuses on the returns attached to generally accepted, systematic drivers of market returns: Market, Small-Large, Value-Growth, Momentum, Asset Growth and Quality. These factors premiums are computed by creating long-short portfolios to isolate the pure factor effects. Foresight Factor premiums can be highly instructive in assessing how your equity portfolio biases are influencing outcomes during periods of volatility or drawdowns.
Our analysis for the GVC commences on 21st February 2020. The results show that Large Cap, Quality and Growth factors outperformed with positive premiums. Our analysis also shows that the impact of GVC has been much more severe in the first 30 days than the previous crisis, both in terms of speed and depth. Based on this pattern of performance, small cap and value style managers faced major headwinds during the GVC. Managers with high market beta also faced challenges. In the final section we present Australian equity managers that exhibit high sensitivity to Quality and Low sensitivity to Market – a winning combination for the current bear market.
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