Multi-Factor Strategies, Value Rotation, and a Model Portfolio to Match

With some help from Joe Biden’s victory in the recent presidential election, both emerging markets and value stocks are getting renewed attention.

Advisors looking to marry those concepts should consider WisdomTree’s Emerging Markets Multi-Factor Model Portfolio.

“This model portfolio is designed for investors with a long-term horizon looking for exposure to a broad universe of Emerging Market equities primarily using factor focused ETFs,” according to WisdomTree. “The selected ETFs provide certain factor tilts that have the potential to generate excess return relative to comparable cap-weighted benchmarks over longer-term holding periods. The strategies may use both WisdomTree and non-WisdomTree ETFs.”

As its name implies, the model portfolio emphasizes multi-factor strategies. Among the five exchange traded funds found in the model portfolio, several feature value exposure, helping advisors position for a rebound.

Emerging Markets Value Perking Up

Progress on the coronavirus vaccine front is a relevant near-term catalyst for this model portfolio.

“Rotation from growth into value stocks is the talk of the financial world, as light starts to gleam at the end of the Covid-19 tunnel. Emerging markets may be following the trend. The MSCI Emerging Markets Value Index jumped 5% in the week after Nov. 9, when Pfizer unveiled encouraging vaccine results,” reports Craig Mellow for Barron’s.

The coronavirus pandemic has amplified the growth trend in emerging market equities. Investors should tread cautiously, focusing on quality companies in developing economies as some segments become increasingly pricey.

China could deliver over 50% of global GDP over the next couple years as the rest of the world slowly recovers from the economic impact of COVID-19. China’s resiliency and growth in a year riddled with coronavirus-induced weakness have attracted many equity managers looking for some level of certainty, along with those seeking the flavor-of-the-month-pick.

“The arithmetic for a value catch-up is compelling enough, after a 2020 rally driven by a handful of Chinese tech champions. The emerging markets value asset class trades at a 60% price/earnings discount to growth, says Alejo Czerwonko, chief investment officer for Americas emerging markets at UBS Global Wealth Management,” according to Barron’s.

For more on how to implement model portfolios, visit our Model Portfolio Channel.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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