- July 1, 2019: Vol. 13, Number 7

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More alike than different: Combining science and art can enhance returns

by Maurizio Grilli

Science, or art? To the uninitiated, the two are antithetical concepts. However, the two fields are not that dissimilar — they both try to answer similar questions about human nature and societal aspirations.

The science of real estate is very different from what it was 20 years ago. Although market transparency is at times still an issue, data quality is way better, forecasting accuracy has vastly improved, and the use of portfolio optimisation techniques has become widely accepted.

Technical perfection, however, is impossible to achieve. Markets are complex systems where a large number of variables can influence returns. In this environment, simple causal associations can be misplaced. Moreover, one size does not fit all. There are many types of investors who have their own motivations and time horizons. This is where the art of making good portfolio allocation judgements can make the difference. And this is what first intrigued us about factor investing — the co

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