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Factor Performance vs Portfolio Concentration – II

The more concentrated, the higher the returns, right?

Nicolas Rabener
10 min read
15 Dec 2025

SUMMARY

  • Smart beta returns vary significantly with portfolio concentration
  • Betas and factor performance impact returns
  • Value and momentum portfolios should be concentrated, others not

INTRODUCTION

In our recent research article, Factor Performance vs Portfolio Concentration, we showed that in the U.S. market, more concentrated long-only, stock-based portfolios benefited value and momentum strategies over the past 20 years. For other factors – such as growth, low volatility, quality, and size -the opposite held true: greater diversification delivered better results.

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