Moving on from index trackers – Dutch discover factor investing

No matter what size

Altis will use the same factors as Syntrus Achmea, with the exception of size, the one factor traditional index trackers take into account. “On the basis of the factors quality,momentum, volatility and value we create a multi-factor portfolio. We don’t include size because we believe it is basically already included in the four other factors. Size as such is not relevant to us,” Smeets says.

While Syntrus Achmea has split their factor-based investments between several managers, enabling them to allocate to factors separately, Smeets is not sure this is the right way to go. “We are examining the question whether to allocate separately to the four factors and give the mandates to four different managers, or to give it to all one party.” Smeets questions whether factor timing can be done efficiently. “We have chosen these four factors with a very long time horizon in mind and, anyway, I’m not sure whether it is actually possible to time these factors. So for now, we will probably not be going to try that.”


It is not only institutional investors that have discovered factor investing. Rabobank, the Netherlands’ largest retail bank, unveiled its new core-satellite approach in September. It looks similar to the one from Altis, with the exception that it uses funds rather than one large multi-factor mandate. “We use funds based on quantitative multi-factor models, such as the Robeco global multi-factor fund,” explains Rishma Moennasing, an equity fund analyst at the bank. “These funds are semi-automated in the sense that their underlying quantitative models select the stocks based on multi-factor analysis.”

Considering the above, the conclusion is probably warranted that smart beta ETFs are simply not smart enough for Dutch investors. Instead, they want either multi-factor solutions or active managers with a factor bias. Factor-investing for now remains constrained to the equity space. While government bond and short-duration corporate bond index-trackers are widely used, factor-based bond investing is still in its infancy. Is this about to change too? Smeets is ready to go for it. “In fixed income we still have to make some strides before we can adopt a factor-based approach in this area too, but eventually this is what we want to do.” 

Part of the Bonhill Group.