1D·

Presentation of multifactor portfolio

estimated reading time: 4 minutes

Twenty years ago, the new market crash wiped out my first stock market money and my ego. I swore off the stock market, but my pension certificate showed me that ducking out has an expiry date.

So the first attempts to start again followed. Here on Getquin, I have learned from positive critical voices from e.g. @DonkeyInvestor and @Epi that there is more to it than "just picking something". Since my last post 6 months ago, this was followed by extreme late-night brooding, Excel monsters, AI research, reading Kommer and countless "new agains".

I have tried to read up on modern optimization models such as Mean-Variance, Black-Litterman and Fama-French etc. and implement them in the best possible way.

The result was this portfolio!

As thoroughly tested as you can in a private garage, and coupled with the insight that we only have to leave the uncontrollable to chance.

And one thing first. I am convinced of this and will not change it.

I just want to share my thoughts and ideas about the direction with you. It's difficult to really explain every detail here, I'm sure I could do it better in a conversation, but that's not possible here. I can assure you that the selection and combination definitely makes sense - at least for me and the construct. Among other things, it was important to me to be able to control individual regions separately. I think I have achieved that.

Global (30%)

- SPDR MSCI All Country World, $SPYY (-2,46 %)

- L&G Global Equity UCITS ETF, $LGGG (-2,49 %)

- iShares Edge MSCI World Momentum, $IS3R (-1,56 %)

- Xtrackers MSCI World Value, $XDEV (-1,62 %)

- Invesco Global Active ESG Equity, $IQSA (-2,5 %)

- VanEck World Equal Weight Screened, $TSWE (-1,81 %)

- VanEck Morningstar Developed Markets Dividend Leaders, $TDIV (-1,44 %)

USA (31.5%)

- L&G US Equity, $LGUG (-2,79 %)

- iShares MSCI USA Mid-Cap Equal Weight, $IUSF (-2,64 %)

- JPMorgan BetaBuilders US Small Cap Equity, $BBCS (-2,75 %)

- SPDR MSCI USA Small Cap Value Weighted, $ZPRV (-2,95 %)

Europe (17.5%)

- HSBC EURO STOXX 50, $H50A (-2,61 %)

- L&G Europe ex-UK Quality Dividends Equal Weight, $LDEG (-1,65 %)

- SPDR MSCI Europe Small Cap Value Weighted, $ZPRX (-1,53 %)

Emerging markets (19%)

- iShares Edge MSCI Emerging Markets Value Factor, $5MVL (-2,36 %)

- UBS LFS MSCI Emerging Markets ETF, $EMMUSA (-2,01 %)

- L&G Emerging Markets Quality Dividends Equal Weight, $LDME (-1,01 %)

- SPDR MSCI Emerging Markets Small Cap, $SPYX (-1,82 %)

Japan (2%)

- UBS Core MSCI Japan, $UFMA (-0,7 %)

Ø TER = 0.25%

In summary, this gives the following breakdown

Regional breakdown

- USA (North America) ~ 48%

- Asia ~ 22%

- Europe ~ 22%

- UK ~ 3.6%

- Japan ~ 4.4%

Market capitalization

- Large Cap ~ 52%

- Mid Cap ~ 26%

- Small Cap ~ 22%

The portfolio deliberately allocates its capital to the regions and - where possible - to all capitalization classes. The world building blocks provide the global beta; value, momentum and quality satellites add factor premiums. In the USA, a complete large/mid/small stack provides a pronounced size bias, while Europe receives a value bias via quality and small value ETFs. The emerging layer combines large-cap value stocks, quality leaders and a small-cap module - a diversification anchor beyond the developed markets.

Due to the almost equal weighting of the 18 positions, the Herfindahl index of ETF weights falls to ~633; indirectly, the portfolio contains several thousand individual stocks. The weighted TER is ≈ 0.25 % p. a., spreads below 0.1 %. This means that, compared to a $GERD (-1,95 %) a favorable multifactor portfolio myself.

The factor tilts (value 42 %, size 35 %, quality/div ≈ 12 %, momentum ≈ 8 %) increase the expected volatility moderately to 18-20 % p.a.; however, historical data on small and value indices indicate 1-2 percentage points additional return over long horizons. Large caps remain present at around 52 %, mid caps at 26 % and small caps at 22 % support the size premium .

With my "multi-factor all-cap portfolio", I combine global market coverage with five proven premiums, without cost or concentration ballast. Of course, I will have to endure additional fluctuations, but I believe that I have created a robust source of returns over the long term.

I have tried to consider everything and leave nothing to chance, except the uncontrollable.

Anyone who has made it this far. Thanks for reading.

I'm looking forward to your feedback.

PS:

YES, I have Bitcoin😉 and also two themed ETFs. They just stay like that.

- ARK AI & Robotics ETF, $AAKI (-4,06 %)

- HanETF Future of Defense ETF, $ASWC (-2,26 %)

- ETC GROUP CORE BITCOIN, $BTC1 (-3,38 %)

---

no investment advice; DYOR

Thanks also to @VPT , @Mister_ultra , @Ph1l1pp , @ShrimpTheGimp , @MoneyISnotREAL , @Staatsmann and @Smudeo for commenting and providing approaches.

46 Comentarios

Kein Spekulant@randomdude

Completely overengineered in my view, but that's how you want it 🤷🏻‍♂️ You might get a little factor bonus, but that's it. You don't have any effective protection against heavy crashes or years of dry spells, for example. It wouldn't be worth the effort for me.

•

Daniel@Bidax

@randomdude Thank you for your feedback.

Edit: I'm still working on "protection". But I hardly see any users here who invest in bonds, commodities and gold. Somehow everyone is in ETFs, then preferably just the $VWRL, individual stocks, crypto or a completely wild mix. It is simply difficult to do the RIGHT thing with too many opinions. So something will certainly change. But I'm proud of my "construct" and I believe it will also bring something.

As I said. Thank you for your feedback.

•

Paketknecht@Paketknecht

I think the influence on your returns is hardly measurable if you work with 4 ETFs instead of one within a region weighted at 19%, as is the case with the emerging markets, and the same with the industrialized countries, which you have weighted at 78%, but which you track with 15 ETFs. You have a lot of overlaps there. The rebalancing effort would also be too great for me and then you also have the risk of small ETFs being liquidated, such as this JP Morgan Beta Builders, which only has 21 million in it. Your strategy can also be well mapped with 5 or 6 ETFs.

- 20% MSCI World Momentum
- 20% MSCI World Value
- 20% MSCI World Mid Cap ETF
- 20% MSCI World Small Cap
- 20% MSCI Emerging Markets IMI (incl. Em small caps)

Possibly add an MSCI World Quality for the industrialized countries. Then you would have everything covered with 6 ETFs. Value, Momentum, Quality, Mid, Small, Large Caps + Emerging Markets incl. their small caps.

But you wrote that you won't change anything, and that's okay, you invest broadly diversified and that's it, not much will go wrong with your construct.

•

Daniel@Bidax

@Paketknecht Thank you for your feedback. I know it's very granular. And maybe in the end it would be enough to focus only on the MSCI World + MSCI EM + MSCI Small Caps.

I have and had a construct in mind that should be more controllable than the pure MSCI index. Which is not to say that this is a bad thing. Otherwise the whole thing would not have been so successful for years.

But thank you for your constructive feedback. But above all, thank you for taking the trouble to really look at it.

••

Pope Donkey XXI@DonkeyInvestor

It's great that you've dealt with it so intensively. You'll know what you're doing. See you at the next regrouping 😁

•

Daniel@Bidax

@DonkeyInvestor Thank you for your feedback. And yes, I am convinced. And I also hope that you won't see me rebalancing. You'll only see me changing the percentage weightings. 😅🤣

•

Epi@Epi

Impressive! 😲 You've really dug deep into portfolio and financial market theory! Such a level is very rare here.

I have a few questions out of interest.
1. how do you handle rebalancing? Do you do without or do you do it once a year, or...? There are also studies that show that rebalancing is at least as important as the actual factor selection. And if rebalancing, what influence does it have on the cost structure of the portfolio?

2. what are the expected performance indicators of your portfolio compared to B&H MSCIWorld? I mean CAGR, max drawdown, Sharpe ratio.

3. why did you refrain from diversification between asset classes (equities only) and between strategies (B&H/rebalance only)? Traditionally, the performance figures for multi-asset multi-strategy portfolios are significantly better. Since I haven't really understood why professionals do without it, I'll ask you about the rational reasons that I may be overlooking.

Thank you and good luck! 👍

•

Daniel@Bidax

@Epi Thank you very much for your feedback. I'm very honored by the way. I really tried for months to get to the bottom of everything possible and to understand the connections.

I wanted to implement rebalancing with the 5/25 method, but my knowledge of Excel has currently failed me. I am currently implementing this manually, before the savings plan is executed, using the actual values and the savings rate.

As the rebalancing works by adjusting the monthly savings rate, I have no additional costs.

2. risk ratios (God willing and the paid AI is right to a certain extent)

Initial situation & methodology
17 UCITS-compliant ETFs, core-satellite mix, > 6,000 individual shares; fund HHI ≈ 648 → no clustering.

Weighted TER 0.24% p.a.; data basis: factsheets (Morningstar/justETF) + internal factor back-tests (GIPS-compliant calculation) .

Unless otherwise stated, all key figures refer to EUR-

total returns and look-through risks 2008-2025.

Long-term return (CAGR)
Back-test 2000-2025 with factor premiums results in ≈ 8% p. a. (band 7-9%) and thus +100-300 bp above MSCI ACWI benchmark .

Reference: MSCI World ETF in EUR delivers 8.45 % p. a. over 30 years - the portfolio realistically achieves +0.5-1 % extra through value/size tilt.

Volatility and risk/return ratios
Ex-ante 1-year volatility 15-17 % (benchmark ≈ 14 %) .

Expected Sharpe > 0.6; Sortino > 0.8 thanks to dividend/quality component. Beta 0.98-1.00 to ACWI; Treynor correspondingly slightly above Sharpe. Tracking error 3-4 % p.a.; current IR 0.2-0.3 (target > 0.5)

Tail risks & drawdowns
Corona 2020: estimated max drawdown ~-30 %; recovery within 7 months .
Lehman 2008: down ~-45% to -50%; recovery < 18 Monate .
Ex-post Worst-Case (1973-2025 Proxy, MSCI World) zeigt -55 % Drawdown mit 159 Monaten Recovery;

Portfolio wäre ~5-10 Punkte besser (Factor-smoothing). 97,5 %-VaR 10 Tage ≈ -20 %, Expected Shortfall ähnlich – liegt im üblichen Aktien-Risk-Budget für Pensionskassen.

Institutionelle Risiko-KPIs
Solvency II SCR 39 % des Marktwerts .
Jensen-Alpha positiv (SMB, HML, MOM-Loadings) – Faktor-Regressions zeigen systematisches Alpha .

Stress-Backtest 2000-2020: 85 % der Krisen mit geringerem Drawdown als ACWI bestanden.

Liquidität & Operationelles Risiko
80 % des Portfolios in 98 % und 0 Fehlabwicklungen in 12 Monaten .
Kleinster Fonds (JPM US SMC) inzwischen > USD 230m AUM → closure risk low .

ESG & concentration risk
Article 8 coverage; controversial sectors largely excluded. CO₂ intensity below index median; Dividend Leaders < 150 tCO₂/mio USD sales .

Top 10 stocks < 5 % of the portfolio;
Apple < 1.5 % .

I have been going back and forth on how to best manage the large, mid, small and the regions. I know there are a lot of ETFs. But I'm sure I can manage them better.

At least that's my bet. And that's what we all do here. And I can't be accused of not having done enough research.

To be honest, I'm a bit proud of it too. Now time just has to be with me.

•

Daniel@Bidax

Re 3.

I probably won't be able to give you a well-founded answer here, as I haven't looked at it from this approach.

I went ALL IN with the 100% shares. However, I wanted different weightings similar to the $GERD principle.

I believe that the emerging markets and Europe still have a lot to offer and that mid and small caps are quite capable of beating large caps in the long term.

That's it. I only had the structure in my head, but not the justifiable approach as to why I did it that way. It just feels right to me.

•

Epi@Epi

@Bidax So, if I understand correctly, you went from 1 MSCIWorld ETF (benchmark) to 19 ETFs for +0.5-1% extra (including some shift in risk).

If you offset the extra return against the lifetime hours invested, then hopefully you get more than the minimum wage. At least that makes you understand why so many people choose not to follow your path. 😏

But the question of why only a multi-factor portfolio and not a multi-factor asset strategy portfolio is still open. I would be most interested in this fundamental question.
Edit: That's done. You were quicker! Thank you!

•

Daniel@Bidax

@Epi 🫣

••

Epi@Epi

@Bidax To 3: Okay, it feels right, even though you don't know the alternatives? Interesting. 🤔

Is it not an option for you to run other strategies alongside your multi-factor strategy? Or are you done with all the portfolio theories now?

It's also a high psychological risk to rely solely on the efficient market hypothesis. I hope you are aware of that.

••

Daniel@Bidax

@Epi That is not correct. I just didn't have it on my screen. I just wanted to use my result and observe it. It is certainly wrong to say that I categorically exclude other things. I'm not doing that. But I admit; it was extremely exhausting to form the construct. I wanted to rest for a year first.

If I may ask, what approach would you have in mind to generate the total multifactor recipe? Crypto, gold, bonds, private equity... ?

And no, I've tasted blood and it feels better to know what you're talking about. I'm just starting out and I still have a lot to learn.

•

Daniel@Bidax

@Epi Is that what you mean?

Risk-Parity / All-Weather
30 % equities
55 % bonds (nominal + infl-linked)
15 % commodities (incl. gold)

Would have a Real CAGR of 5 - 6 % and a Sharpe of 0.60 - 0.70 and Max DD of - 20 %

••

Epi@Epi

@Bidax Almost. ;-) I'm not sure if there are ready-made concepts for what I mean. I'm talking more about a mix of different, uncorrelated asset classes and strategies. What exactly the mix looks like depends on the individual risk appetite, the possible savings rate, the intended withdrawal rate and the retirement date. For example, you could take the following allocation as a starting point and optimize it with Markowitz: 25% B&H multifactor equity ETFs, 25% B&H gold (2/3)/BTC (1/3), 25% momentum interest rate strategy 2xSPYTIPS (see my article), 25% dual momentum multi-asset strategy GTAA/ 3xGTAA. With such a portfolio, a relatively constant 15%pa at maxDD -20% should be possible (Sharpe approx. 1.2-1.4). I myself have a slightly different strategy allocation due to personal path dependencies: 1/3 gold cycle, 1/3 (3x)GTAA, 1/6 2xTIPS, 1/6 ETF trading. The specific allocation can change on a monthly basis. At the moment I am sitting on approx. 1/3 gold, 1/3 cash, 1/3 GTAA and other. This allows me to sleep peacefully or go on vacation, I have YTD approx. +10% with -10% max. DD. Since I started to deal with momentum models 3 years ago, I understand less and less why investors rely so heavily on the high volatilities and low returns of B&H equity ETF models. Perhaps you can explain it to me? Why did you spend all your time on the complex factor models and not on the relatively simple momentum models? Not an accusation, but pure interest.

•

Daniel@Bidax

@Epi A great thing. I have to take a look. I actually didn't have that on my screen yet. I'll get back to you. But it'll take a while. I'll get in and give you some feedback. It certainly sounds interesting.

•

Daniel@Bidax

@Epi but I don't think I have the knowledge or perhaps the sense. But I'm going to find out more and take a very close look.

•

Ver todas las 21 respuestas adicionales

GiCi@GiCi

I like it, but is difficult to provide feedbacks without the shares allocated to each ETF. In the long-run, the portfolio might outperform, but we don't know how much will It take (Hey, "Value", we are still waiting for you since 2007).
In general, I don't find weong elements, but we Need % to understand how much you tilted the core and the factors. Then a question: value and momentum are uncorrelated, buy you weighted much more the former than the latter. Why so?

••

Daniel@Bidax

@GiCi I will fix that issue

••

GiCi@GiCi

@Bidax no problem. I edited my text, have a look at it and take your time.

•

Daniel@Bidax

@GiCi Thanks for the feedback—and for your patience. After 13 years of underperformance (2007–2020), classic value sectors are still trading at steep discounts to earnings and book value, so I’m betting that a heavier value tilt will ultimately pay off. Momentum does diversify against value (the long-run correlation is roughly –0.3), but it also suffers sharp hits when market leadership flips, and—at least in my research—those momentum crashes show up more often than value drawdowns.

In other words, the big value tilt is no accident; it’s a deliberate response to a deep valuation gap, while the smaller momentum sleeve serves mainly as a risk counterweight. Patience is essential: I’ll need to ride out an entire market cycle to know whether the bet lands. Still, the combination should boost my odds of capturing meaningful multi-factor alpha—without driving costs through the roof.

•

Global I.@gloinvest

"If you can't explain it to a 7 year old in 5 minutes - don't do it." - Peter Lynch

••

Daniel@Bidax

@gloinvest Sorry for asking, it's been a long day so far. What exactly does the quote you used mean for me? I confess, I don't understand it so directly. At least not in the context of my post.

••

Global I.@gloinvest

19H

Investment strategy
* Multi-factor all-cap portfolio: This is an actively managed strategy that aims to outperform the market by focusing on five specific factors: value, size, quality, dividends and momentum. It uses 18 holdings, including ETFs and specific investments such as Bitcoin and thematic ETFs, to achieve global diversification.
* MSCI ACWI IMI: This is a passive index that tracks the performance of equities from 23 developed countries and 24 emerging markets. It covers approximately 99% of global market capitalization, including large, mid and small cap companies. The strategy is to simply track the market without focusing on specific factors.
Diversification
* Multi-factor all-cap portfolio: The portfolio is globally diversified, but has a deliberate weighting in the US (48%), Asia (22%) and Europe (22%), with a focus on the above factors. The capitalization is also diversified (large-, mid- and small-cap), but with a specific weighting.
* MSCI ACWI IMI: The index offers very broad, passive diversification across 8,640 stocks (as at the end of 2024), covering around 99% of the world's investable equities. The weighting of regions and sectors is based purely on market capitalization.
Cost
* Multi-factor all-cap portfolio: The weighted total expense ratio (TER) is around 0.25% per annum. There are also potential costs for manual rebalancing.
* MSCI ACWI IMI: The TER for ETFs that track this index is generally a very low 0.17% per year.
Risk and return
* Multi-factor all-cap portfolio: The author expects a higher volatility of 18-20% per year, but also a potential excess return of 1-2 percentage points per year over a standard MSCI ACWI. The strategy also includes riskier individual positions such as Bitcoin and thematic ETFs.
* MSCI ACWI IMI: Historically, the index has had an average annual growth rate of 7.68% and a standard deviation of 14.57% (in EUR, from 1994 to 2024). The risk is lower than with a more active portfolio as it tracks the broad market and does not make specific bets on factors.
Conclusion
The appropriateness of the above strategy versus an MSCI ACWI IMI depends on your investment philosophy:
* Pro multi-factor strategy: if you are convinced that certain factors (such as value, size, quality) will outperform over the long term and you are willing to take on higher risk and potentially higher volatility for the prospect of higher returns, this strategy might make sense for you. However, the active approach and the specific additions (Bitcoin, thematic ETFs) require closer monitoring and a deeper understanding of the risks involved.
* Pro MSCI ACWI IMI: If you are looking for a simple, low-cost and maximally diversified investment solution that passively tracks the entire global market, the MSCI ACWI IMI is a proven and solid choice. It requires minimal management and is a very robust long-term option.
The multi-factor strategy is riskier and more active compared to the MSCI ACWI IMI. While it can potentially offer higher returns, this is not a guarantee and comes with more effort and higher costs.

••

Daniel@Bidax

19H

@gloinvest Thank you for the comparison. I just didn't understand your quote in the context of my idea. I personally believe in factors. That's why I built my construct this way.

••