Our final Venn Factor Performance Report of the year will consist of two sections: one in which we’ll focus on December 2021 factor performance and another that provides 2021 full year factor performance.

December 2021 Factor Performance


Source: Venn by Two Sigma. The median and percentile columns measure the performance of each factor in the Two Sigma Factor Lens relative to the entire history of the factor in USD, using monthly data for the period March 1995 - December 2021.

  • Global Equity markets were higher on the month, exhibiting resilience in the face of several potential headwinds, including:
    • The rapid spread of the new COVID-19 variant, Omicron, and concerns surrounding how that might impact economic growth
    • Central bank policy tightening to combat rising inflation
    • The setback of President Biden’s Build Back Better bill (a ~$2 trillion tax and spending package) in the U.S., which is a key component of his economic agenda
  • On the whole, it was a fairly uneventful month for the Interest Rates factor, although there was some interesting behavior intra-month. Government bond yields fell early in the month due at least in part to risk-off fears related to Omicron, then yields rallied into year-end, more than making up for the fall earlier in the month.
  • Commodities were up across sectors in December, resulting in a 4.17% return for the factor’s underlying input, the Bloomberg Commodity Index. However, once the factor was residualized to Equity, Interest Rates, and a global currency basket, the return was more modest at 0.55%.
  • In terms of the macro style factors:
    • Equity Short Volatility ended the month in positive territory, as the market digested Omicron’s impact and the VIX fell from 27.19 to 17.22.1
    • The Fixed Income Carry factor delivered gains, reversing its negative performance in November. The primary contributor was the factor’s long position in the Canadian 10-year government bond. Yields in Canada fell over the month (diverging from the path of most other government bond yields), as the Bank of Canada came off as slightly more dovish than expected at their early December meeting.2
  • There were many notable movers within the equity style factor grouping:
    • Low Risk was the best performing factor in the lens in December. 
    • Higher yields supported Value stocks, which tend to have relatively near-term cash flows that are less sensitive to rising rates when discounting those cash flows to the present to determine the stock’s value.
    • Crowding experienced its best monthly performance since its inception in the Two Sigma Factor Lens (January 2008). This means that stocks that were heavily shorted by the investment community underperformed stocks that were less heavily shorted.
    • Quality was another top performer, thanks to its Investment Quality and Earnings Variability components, which were up over 3% each in December.
    • On the other hand, positive Momentum and Small Cap stocks underperformed their negative Momentum and large cap counterparts respectively.

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2021 Full Year Factor Performance

The table below shows factor returns for 2021, in addition to average annual returns and standard deviations dating back to 1996.3 The 2021 performance is also expressed as the number of standard deviations away from the long-term average to put it in historical perspective. Despite double-digit returns for several factors this year, no factor had terribly outsized performance (i.e., no factor exhibited performance that was more than +/- two standard deviations away from its historical average annual return).

2021 FY


References to the Two Sigma Factor Lens and other Venn methodologies are qualified in their entirety by the applicable documentation on Venn.




3The Crowding factor’s returns data begins in 2008.


This article is not an endorsement by Two Sigma Investor Solutions, LP or any of its affiliates (collectively, “Two Sigma”) of the topics discussed. The views expressed above reflect those of the authors and are not necessarily the views of Two Sigma. This article (i) is only for informational and educational purposes, (ii) is not intended to provide, and should not be relied upon, for investment, accounting, legal or tax advice, and (iii) is not a recommendation as to any portfolio, allocation, strategy or investment. This article is not an offer to sell or the solicitation of an offer to buy any securities or other instruments. This article is current as of the date of issuance (or any earlier date as referenced herein) and is subject to change without notice. The analytics or other services available on Venn change frequently and the content of this article should be expected to become outdated and less accurate over time. Any statements regarding planned or future development efforts for our existing or new products or services are not intended to be a promise or guarantee of future availability of products, services, or features.  Such statements merely reflect our current plans.  They are not intended to indicate when or how particular features will be offered or at what price.  These planned or future development efforts may change without notice. Two Sigma has no obligation to update the article nor does Two Sigma make any express or implied warranties or representations as to its completeness or accuracy. This material uses some trademarks owned by entities other than Two Sigma purely for identification and comment as fair nominative use. That use does not imply any association with or endorsement of the other company by Two Sigma, or vice versa. See the end of the document for other important disclaimers and disclosures. Click here for other important disclaimers and disclosures.

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