Multifactor funds: an early (bearish) assessment

Multifactor funds, which offer risk factor diversification, have several appealing characteristics. They enable investing in factors, has become a typical way to enhance portfolio’s long-term risk-adjusted return; they provide exposure more than one factor, enables diversification; and these benefits neatly packaged product. What’s not like? Their performance. Although their track record is limited, the current evidence on multifactor funds targeting US, global, international, emerging markets shows that products largely failed outperform market-wide, cap-weighted indexes, or low-cost ETFs them, terms of return, downside protection.