Systematically Translating Factor/Sector Beliefs into an ETF Portfolio

How can typical investors/managers rigorously translate their views on factor/style and sector/theme exposures into a portfolio of exchange-traded funds (ETF). In their November 2025 paper entitled “Implementing Systematic Risk Premia, Factor-Based Strategies, and Sector Rotation with ETFs”, Nino Antulov-Fantulin, Petter Kolm and Mario Šikic describe a methodology for constructing systematic, long-only investment strategies for family offices and wealth managers using exchange-traded funds (ETFs). The approach, which requires no explicit return forecasts, integrates beliefs on factors and sectors by tilting the portfolio toward them while controlling tracking error relative to a selected benchmark. It employs daily covariance of ETF returns to forecast variance/risk. They illustrate the approach through three case studies in equities and fixed income. Using theory and the most recent five years of returns for selected ETFs in case studies, they find that: (more…)