Risk due diligence approach

The advantage of this approach is that investors obtain greater insight into their exposure to specific factors in the portfolio. It also helps determine whether the portfolio contains desired or undesired concentrations of factors. It then becomes easier to assess the sensitivity of the portfolio in specific scenarios.

The chart below shows a hypothetical portfolio of factor overweights and underweights. Per factor the portfolio has three subdivisions into levels of exposure: substantial (top), average (middle) and low (bottom).

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Risk due diligence approach

An approach¹ to implementing factor investing. An analysis is made to establish whether the current portfolio is suitably distributed over factors and does not incorporate excessive risk. This can be done using the 'Robeco Factor Exposure Monitor'.

Figure 8. Relative factor exposures of portfolios

Footnote

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Disclaimer

Risk due diligence approach

An approach1 to implementing factor investing. An analysis is made to establish whether the current portfolio is suitably distributed over factors and does not incorporate excessive risk. This can be done using the 'Robeco Factor Exposure Monitor'.

Figure 8. Relative factor exposures of portfolios

Footnote

See also

Invisible layers surface to deliver attractive returns

Related insights on this topic

The many faces of growth

Unlocking EM potential: Our new active ETF

Tariffs turmoil: what’s next for investors?

Quant Street, Episode 5 – What does AI mean for quant investing?

When the equity risk premium fades, alpha shines

The nature of innovation: Incremental, intentional, and always evolving

Quant Street, Episode 4 – What’s the perfect quant stock?

Quant chart: US Treasuries up for auction

Quant Street, Episode 3 – Which factors work (and which don't)?

Active Quant: Targeting alpha with confidence

Harvesting factor premiums in EM large-cap stocks

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More glossary terms

Let's keep the conversation going

An approach¹ to implementing factor investing. An analysis is made to establish whether the current portfolio is suitably distributed over factors and does not incorporate excessive risk. This can be done using the 'Robeco Factor Exposure Monitor'.