Why factor crowding fears are overblown

‘Overcrowding’ is the new buzzword in the factor investing community. Luc Dumontier and Guillaume Garchery from La Française Investment Solutions explain why this fear is largely overstated

The rush into factor investing strategies – today worth about $1 trillion – has raised concerns that alternative factors are becoming crowded, and therefore overpriced and more sensitive to dislocation events. Is this fear justified?

This article seeks to answer that question in relation to equity alternative premia, the best known and most popular premia. The arguments put forward are equally valid for premia in other asset classes.

We first return to fundamentals that underlie the existence

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