When constructing a global equity portfolio using factor tilts, a portfolio manager decides to overweight companies with strong balance sheets and consistent earnings, often associated with lower volatility, especially during economic downturns. This approach is primarily a tilt towards which factor?

Question: When constructing a global equity portfolio using factor tilts, a portfolio manager decides to overweight companies with strong balance sheets and consistent earnings, often associated with lower volatility, especially during economic downturns. This approach is primarily a tilt towards which factor?

Answer options:

• Size
• Momentum ✅ Quality
• Value

Correct answer: Quality

Explanation: Overweighting companies with strong balance sheets, consistent earnings, and lower volatility is characteristic of a 'Quality' factor tilt. Quality companies are typically robust, financially sound businesses that are often resilient during periods of market stress and can offer more stable returns.