Multi-Asset Class Factor Premia: A Strategic Asset Allocation Perspective

Abstract

In this article, the authors explore the benefits of strategic allocations to factor premia for long-horizon investors. They consider single-asset-class and multi-asset-class factor premia overlays to underlying equity–bond investments. The benefits of the overlays are assessed across the accumulation and decumulation stages of an investor’s lifecycle. Their analysis suggests that factor premia provide notable benefits by increasing the likelihood of achieving accumulation goals, smoothing the transition path to achieving those goals, and enhancing decumulation outcomes.