Factor Scoreboard

Multi-factor equity strategies are primarily designed to provide portfolio diversification – alternative sources of risk and return that will complement traditional stock and bond allocations.

The Factor Scoreboard creates a way for investors to see which factor strategies have been “working” and which are struggling across different geographies. Dramatic underperformance of value factor strategies might indicate a valuation bubble within one market. A negative momentum performance might indicate a sudden shift in direction by the biggest winners or losers of the past months or year.

In addition to describing the recent history of particular factor strategies, the Factor Scoreboard can help investors assess what’s taking place in the stock market in terms of long-run historical sources of return. The returns to multi-factor equity strategies can also help investors understand what’s taking place “under the hood” of global equity markets. Many investors believe major factors like value, momentum, and profitability exist because of a fundamental economic or psychological tendency that affects stock prices.​

This is an informational resource only. The above factor category returns do not represent returns of holdings of Counterpoint’s Tactical Equity Fund. We compute factor categories by blending returns of individual factors in an equal-weighted manner. Counterpoint uses these individual factors as early-stage inputs to its equity funds’ market-neutral models. These returns are meant to give investors an indication of what is happening to broad factor return categories for various time frames. While these are not returns to Counterpoint’s funds, there may be a correlation between performance on the Factor Scoreboard and the funds’ market-neutral component.



Category Definitions

Quality

Rankings based on financial statement quality characteristics, e.g. Asset Growth and Profitability anomalies.

Momentum

Rankings based on historical market returns that have predictive characteristics.

Sentiment

Rankings reflect indicators of outlook such as revisions to analyst estimates of future earnings, share issuance changes, or measures of short interest and demand in the share lending market.

Valuation

Rankings based on measures of company valuation such as price/sales ratio, and prices/earnings ratio.

Stability

Rankings based on measures of underlying company risk, such as volatility or beta.

Methodology

The rankings used to group periodic returns are re-calculated daily based on live market and financial data, and factor category returns are based on live changes in ranking. Year-to-date factor returns are formulated using compounded daily factor returns given daily changing rankings within the period, while trailing 5-day and month-to-date factor returns are formulated using only the latest day’s ranking. This will explain differences between month-to-date and year-to-date returns when date periods overlap.

The above factor returns are grouped by quintiles. The 1st quintile (Q1) represents the average daily return of the lowest 20% ranking companies (potential shorts) for the category. The 5th quintile (Q5) represents the average periodic return for the top 20% ranking companies (potential longs) within the same category.  Q5-Q1 is the periodic return to a theoretical portfolio that is long all of the top ranked companies and short the lowest ranked companies within the category. This represents an attempt to capture the spread in performance between “good” and “bad” companies. These return calculations assume no transaction costs or market frictions.  These returns do not represent the returns of the Funds’ models. They represent raw factor category returns, and are unoptimized long-short returns determined with no consideration of market beta or industry exposure.

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Mutual Funds involve risk including the possible loss of principal. Investors should carefully consider the investment objectives, risks, charges and expenses of the funds managed by Counterpoint Funds. This and other important information about the funds is available in their prospectuses, which can be obtained at counterpointfunds.com or by calling 844-273-8637. The prospectuses should be read carefully before investing. The Counterpoint Funds fund family is distributed by Northern Lights Distributors, LLC member FINRA/SIPC. To reach the Counterpoint sales team, please refer to our contact page.

5516-NLD-09/01/2021

 

 

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