Hi Norbert, thanks for sharing your investment experience and philosophy.

We could replace the long-short multi-factor portfolio with trend following funds (CTAs) in the article and would likely get similar results. Even better, combine both as an alternative allocation, which you seem to be doing.

I haven't read Lars Jaeger's book, but should and agree that the alternative beta capacity is large and unlikely to disappear, for a few reasons:

1) Factors are as cyclical as equity markets and are not particularly easy to hold in a portfolio, even if combined into a multi-factor portfolio. Most investors do not have the emotional capacity to stomach the drawdowns, which makes it unlikely that all factors become structurally crowded. The data supports this as factor valuation spreads are diverse, despite record smart beta AUM. Please see this related article: https://blogs.stage.cfainstitute.org/investor/2019/08/19/how-painful-ca…

2) Plain beta represents negative factor exposure in some cases, eg for the Size factor. The trend towards ETFs, which favours large caps, is making some factors cheaper from a valuation perspective.

3) Factors have different performance drivers and many of them are behavioral, which would only become irrelevant if humans stop trading and AI/algos would trade totally differently (vs being programmed by humans). For example, one reason why Value works is because cheap stocks represent companies in trouble, which makes them emotionally unpleasant to hold and is a market characteristic that is unlikely to disappear.

Best regards, Nicolas