This two-part paper describes the evolution of Russell Investments’ equity factor investing. Part one focuses on utilizing a Custom Risk Model (CRM) with Russell Investments’ factor scores for portfolio construction and examines the robustness of concentrating factor portfolios. Part two focuses on the evolved active positioning strategies (APS), providing a fully integrated approach that embeds overall preferred positioning into a custom-built strategy designed to meet the unique needs of each fund.
This paper proves the efficacy of using the CRM in factor portfolio construction. Additionally, it provides the empirical testing of Russell Investments’ APS 2.0 investment framework, demonstrating that constraints and views beyond factors can be applied in a robust way, which is an equally important evolution in how factor views are built into funds.