How to Approach Long-only Equity Factor Allocations

How can investors and fund managers best exploit premiums associated with value, momentum, profitability, investment and low volatility factors, either to generate absolute return or to beat a market benchmark? In his September 2025 paper entitled “Strategic Style Allocation: Absolute or Relative?”, Pim van Vliet examines strategic allocation across long-only, value-weighted versions of these equity factors, depending on objective: absolute return or benchmark outperformance. To assess absolute return, he evaluates Sharpe ratios of factor allocations. To assess benchmark outperformance, he evaluates information ratios of factor allocations. He also investigates dynamic allocation between low volatility and the other factors, with portfolio adjustment frictions. Using long-only U.S. value-weighted factor returns during July 1963 through May 2025 and global factor index returns during January 1999 through March 2025, he finds that: (more…)