01 Strategy & Academic Basis
The Classic Fund draws directly from Eugene Fama and Kenneth French's landmark research demonstrating that a meaningful proportion of cross-sectional equity returns can be explained by three systematic risk factors: market excess return (Mkt-RF), small capitalisation (SMB — Small Minus Big), and value (HML — High Minus Low book-to-market ratio). The 2015 extension adds profitability (RMW) and investment (CMA) factors.
By tilting systematically toward small-cap and value stocks while maintaining broad market exposure, the portfolio aims to harvest these academically documented risk premia over a full market cycle. Factor loadings are rebalanced quarterly to prevent drift.
02 Investment Pillars
03 Simulated Performance
04 Asset Allocation
05 Representative Holdings
| Security | Region | Factor Tilt | Weight |
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06 Macro Positioning & Investment Thesis
Factor investing is regime-sensitive, and the current regime — sticky 3.8% inflation, higher-for-longer rates, and an energy shock from the Strait of Hormuz closure — is unusually favourable to the premia this fund harvests. When capital is no longer free, the market stops paying a premium for distant, speculative growth and starts rewarding profitability and reasonable valuation today.
Value & Profitability The right factors for a higher-rate world
The value premium (HML) and the profitability premium (RMW) tend to do their best work precisely when the cost of capital rises. A higher discount rate compresses the present value of long-duration, cash-burning "growth" the hardest, while cash-generative, sensibly valued businesses re-rate in relative terms. The fund's systematic tilt toward these factors is therefore not just an academic exercise from Fama-French (1993, 2015) — it is structurally aligned with a world where rates stay elevated and energy and wage costs keep inflation sticky.
Quality Screen Profitability as a defence
The robust-minus-weak profitability screen does double duty in this environment. It tilts toward companies that fund themselves from operating cash flow rather than capital markets — exactly the businesses insulated from the rollover risk of refinancing debt at higher rates. It also naturally underweights the speculative end of the AI complex, where many companies are not yet profitable and are increasingly squeezed by rising energy costs. The fund captures AI exposure through profitable incumbents, not cash-burning hopefuls.
Discipline Systematic, not discretionary
Crucially, the strategy remains rules-based. Factor weights are rebalanced systematically rather than chased, which prevents the portfolio from drifting into whatever narrative is loudest — a discipline that matters most in a headline-driven, geopolitically charged market where the temptation to abandon process is highest.