We’re honored to announce that J.P. Morgan has published a very favorable research report based on Irrational Capital’s Human Capital Factor. As you may have seen, J.P. Morgan was recently named “The Research Firm That Won 2020” as the year’s Top Global Research Firm by Institutional Investor. Even setting aside these well-deserved accolades, we are thrilled to collaborate with such an incredible team on a topic that is so important to us and others.
This report, entitled “Introducing the Human Capital Factor”, explores the connection between the Human Capital Factor and excess returns. Of particular interest, the report notes that the unique traits captured by the Human Capital Factor are “extremely likely to be the greatest asset and resource companies possess.”
The report found that the Human Capital Factor “strictly dominates all [other investment] styles across all metrics” and yielded the highest returns, lowest volatility, highest Sharpe ratio, highest hit rate and lowest maximum drawdowns when compared to Value, Growth, Momentum, Quality and Risk investment styles.
A few other key highlights:
An important implication of the research is that HCF captures “behavioural trends that are not readily available via other data sources” and “unique characteristics which are not present in newsflow and sentiment based metrics.”
HCF scored exceptionally well compared to other ‘Social’-centric ESG sources and metrics, producing the highest annual return, Sharpe ratio, t- Stat and hit rate compared to a sample set of three other prominent ‘S’-focused ESG data sources.
Importantly, “HCF data is orthogonal to other styles and enhances returns, Sharpe ratios and lowers draw-down” when combined with other factors and strategies. The performance of HCF “exemplifies the power of using novel data sources” to create excess returns.
To access the complete report, fill out the linked form and you'll gain access to the full research papers from J.P. Morgan based on Irrational Capital's groundbreaking work with the "Human Capital Factor".
More than anything, we believe this research shows (once again) that cultivating a strong corporate culture is one of the most effective ways to create economic value and growth.