Evaluating a Quantitative Equity Portfolio Strategy

You are an investment manager overseeing a quantitative equity portfolio with a focus on active equity investing strategies. Your firm has recently developed a new factor model aimed at enhancing alpha generation through the systematic incorporation of factors such as value, momentum, size, and quality. The model is designed to dynamically adjust exposure to different factors based on market conditions identified through technical and fundamental signals.

During a recent quarterly review, you observed a decline in the performance of your portfolio relative to the benchmark, attributed to an overexposure to value stocks during what appears to be a growth market recovery. Additionally, internal discussions revealed varying opinions on the optimally calibrated factor weights in your model. In light of these observations, critically assess the effectiveness of your current active quantitative strategy, discussing its strengths and weaknesses in different market environments. Provide actionable recommendations for adjusting the factor model to better navigate changing market conditions in the future.