Factor investing: a modern blueprint for advisors

For years, investors and advisors have faced a familiar choice: passive or active investing. Passive strategies, with their low costs and mechanical approach, track broad markets but often miss opportunities for tailored decision-making. Traditional fundamental active management brings expert oversight but can come with higher fees and inconsistent results.

However, a different approach is bridging this divide: factor investing. Unlike purely passive tracking, factor investing represents a disciplined, systematic form of active management. Factor investing seeks to actively tilt portfolios toward stocks with historically rewarded traits. This method combines quantitative analysis with the adaptability and intent of active investing, offering a thoughtful alternative for those seeking more than the potential market averages.

What exactly is factor investing, and why should it matter to you and your clients?

What is factor investing?

Factor investing employs historically proven, quantitative indicators for stock selection, striving to cost-efficiently outpace the returns of passive investing. These factors are typically grouped into the categories of: 

• Value: Seeks to invest in stocks that are inexpensive relative to fundamentals.
• Quality: Seeks to invest in stocks with healthy balance sheets.
• Momentum: Seeks to invest in companies with positive earnings and price movement.
• Low volatility: Seeks to invest in stocks with stable earnings and lower risk.  

If you appreciate data-driven decision-making, you’re likely already aligned with the principles of factor investing.

Why now?

Markets evolve. So should your investment toolkit. Factor investing provides a structured, research-backed way to pursue returns and help manage risk in an increasingly complex landscape.

• Research-based: Historically rewarded persistent drivers of return, backed by decades of academic and empirical research.
• Optimized, multi-factor approach: Sophisticated investment process that seeks to maximize risk adjusted returns.
• Adaptability: Factor strategies evolve as markets and data change, designed in an effort to deliver better outcomes for investors.
• Efficiency: Factor-based solutions can be cost-effective, tax-efficient, and scalable across diverse client needs.

We believe the future of investing lies not in chasing trends alone, but rather in building on time-tested foundations. Factor investing provides a flexible, efficient framework that evolves with markets and meets clients where their goals are.

By embracing factor investing, you’ll be equipping your practice and your clients for long-term success.

Important information 

This information is based on the views of, and provided by, SEI Investments Management Corporation (SIMC), a registered investment adviser and wholly owned subsidiary of SEI Investments Company.  This information should not be relied upon by the reader as research or investment advice or recommendations (unless SIMC has otherwise separately entered into a written agreement for the provision of investment advice regarding the subject matter of this material).   

There can be no assurance that performance will be enhanced or risk will be reduced for investment strategies that seek to provide exposure to certain quantitative factors. Exposure to such investment factors may detract from performance in certain market environments, in some cases for extended periods. In such circumstances, an investment strategy may seek to maintain exposure to the targeted investment factors and not adjust to target different factors, which could result in losses.

While the investment strategies are actively managed, the strategies’ investment process is expected to be heavily dependent on quantitative models and the models may not perform as intended.

The information contained herein is for general and educational information purposes only and is not intended to constitute legal, tax, accounting, securities, research or investment advice regarding the strategies or any security in particular, nor an opinion regarding the appropriateness of any investment. This information should not be construed as a recommendation to purchase or sell a security, derivative or futures contract. You should not act or rely on the information contained herein without obtaining specific legal, tax, accounting and investment advice from an investment professional.

Neither SEI nor its affiliates provide tax advice. Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by you for the purpose of avoiding tax penalties; (ii) this communication was written to support the promotion or marketing of the matters addressed herein; and (iii) you should seek advice based on your particular circumstances from an independent tax advisor.

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