FYI: Factor strategies, such as value, low volatility, and quality, often end up with industry tilts that can be an unintended source of risk. In March 2017, Morningstar published a study that found that value and low-volatility investment strategies exhibited consistent industry tilts that did not significantly contribute to their success.[1] However, these tilts seemed to help the momentum factor, where they were more dynamic. This suggests that investors could reduce active risk without materially sacrificing returns by constraining industry weightings among factor strategies with persistent industry tilts.
Regards,
Ted
https://www.morningstar.com/articles/935493/quality-and-value-without-the-side-sector-bets.html
