The Morningstar Risk Model and Factor-Based Investing Performance

Identify and assess risk in your clients' investments

Factor investing is a method that strives to minimize risk by assessing an investment's exposure to a diverse set of factors or market conditions. The Morningstar Risk Model is designed to gauge exposure to 36 distinct factors, including six exclusive factors. This report emphasizes returns as the key measure of factor performance.

Mirroring the trend from the previous quarter, the volatility factor took a hit in Q3, with a 1.34% drop and an overall decline of 4% year-to-date. The downturn in volatility suggests that investors who shunned volatile securities were rewarded for their caution. The current market climate likely prompted a more risk-averse attitude, driving investors towards less volatile assets.