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 - March 2021.


Market Themes & Factor Performance Summary

  • March was a strong month for the global Equity factor, particularly in developed markets. 
    • European equity markets led as growth expectations improved1 despite a worsening COVID situation.2
    • In general, equity markets were supported by more fiscal and monetary stimulus. The US for example, passed President Biden’s first stimulus package3 and the Fed maintained its accommodative stance. 
  • Global sovereign 10 year yields increased slightly over March, resulting in the Interest Rates factor losing 10 bps. US yields in particular experienced a notable increase with the yield on 10 year Treasurys ending March around 1.75% (rising from 1.46% to start the month, after rising notably in February from a starting point of 1.09%).4 This was at least partly supported by higher growth and inflation expectations.5
      • Speaking of higher inflation expectations, inflation hedges generally paid off in March with the Local Inflation factor delivering over 3% returns. For more information on this factor, including its construction, what it’s meant to capture, and how it can help explain inflation sensitivity of a portfolio or investment, read our three-part inflation blog series6 and/or watch our inflation webinar.
  • The USD rallied in March, supported in part by rising rates.7 This activity contributed to the Foreign Currency factor in the USD version of the factor lens (which is long G10 ex USD currencies, funded by a short USD position) losing nearly 4%.
  • As we reported in the last couple Venn Factor Performance Reports,8 the equity styles experienced sizable moves again in March:
    • Low Risk, a factor that struggled meaningfully during the COVID market crisis last year and failed to recover during the rest of 2020, posted one of its best months with a return over 7% (the factor’s YTD performance is now 1.05%, bringing its cumulative return since the start of the COVID market crisis on February 24, 2020 through March 31, 2021 to -33.19%). Both components of the factor contributed, but Residual Volatility far outpaced gains in Beta. This again highlights the sensitivity of factor performance to design choices such as how one defines “low risk.”9
    • Value stocks continued their strong recent performance, buoyed by more stimulus, higher yields (particularly benefiting stocks in the financials sector),10 and the introduction of an infrastructure package in the US.
    • Quality stocks posted gains of 3.04%. Gains from Investment Quality, Earnings Variability, and Profitability outweighed losses in Leverage and Earnings Quality.
    • Crowding was up almost 1%, continuing its recovery from its worst month since at least 2008 in January, during which short squeezes on a number of out-of-favor stocks like Gamestop hurt the factor (see the January 2021 Venn Factor Performance Report for more information).
    • On the negative side, Momentum lost just over 5%, at least partly driven by losses in the technology sector.
  • Finally, in terms of the macro styles:
    • Fixed Income Carry continued its poor performance from last month, as higher-yielding government bonds underperformed their lower-yielding counterparts.
    • The VIX dropped 8.6 points over March,11 which benefited the Equity Short Volatility factor, as markets slowly returned to more normal conditions.
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References to the Two Sigma Factor Lens and other Venn methodologies are qualified in their entirety by the applicable documentation on Venn.





4Source: Trading Economics.


6Part 1:

Part 2: 

Part 3:

7The US 10 year yield increased the most in March compared to other major government bonds (UK, Australia, Japan, Germany, and Canada). It also ended the month with the second highest 10 year yield in our Fixed Income Carry factor universe (behind Australia).

8February 2021: 

January 2021: 

9For more information on how design choices can impact Low Risk factor performance, please read the Two Sigma Street View:

10The iShares Global Financials ETF exhibited a Value beta of 0.62 over the period March 1, 2018 - March 1, 2021. The ETF outperformed the MSCI World Index Net TR in March by approximately 1.3%.

11Source: The VIX ended March at 19.4 from 27.95 to start the month.


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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