May I know whether factor timing is mostly used by quantitative or fundamental manager? In section about active equity investing: Strategy; it introduces equity style rotation (one type of factor timing) which is a quantitative strategy. Thus, I assume factor timing is mostly used by quantitative manager. However, when I go to Section “Active Equity Investing: Portfolio construction”, there is a table contrasting systematic approach vs discretionary approach. In that table, it states that discretionary approach uses factor timing while systematic approach seldom uses factor timing. Did I misunderstand something here?
Anyone can advise? thanks!!!
Hello. I have a doubt. In the CFA book they say that factor timing is more likely to be implement among discretionary managers, specially those with a top-down approach.
In my opinio, this is not true. Systematic managers are more likely to implement this strategies since they would rotate the portfolio based on systematic rules (sector indicartors for example).
Could you please give me an explanation why this is not true.
Thanks in advance.
In the 2020/2021 Level III CFA curriculum, volume 4, reading 25, §3.1.1, p. 475, the second bullet point reads, in part, “Factor timing is a challenging endeavor, and few factor-based systematic strategies have integrated a factor timing approach.”
Perhaps you’re thinking more along the lines of sector timing (sector rotation) instead of factor timing.
In any case, it’s CFA Institute’s exam, and if you want to get credit on this type of question, tell them what they want to hear: factor timing suggests a discretionary approach, not a systematic approach.