# 1.6.18 Factor returns

In *Scientific Infra and Private Assets'* pricing methodology, we decompose the excess expected return of an asset into multiple factors: size, leverage, profit, and investment. The exposures to each of these factors determine the returns that an asset can generate. By using long-short factor mimicking portfolios, we attribute the returns of infrastructure assets due to each of these factors.

Investors can use these factors for return attribution of their infrastructure portfolio, or in factor investing by selecting assets that have high/low exposures to each of these factors. The calculations of the individual factor returns are described below.

## Size Factor Return (small minus big - SMB)

where:

Assets:

Small: Total Assets ≤ Median Total Assets.

Big: Total assets > Median Total Assets.

Leverage:

Low: Leverage ≤ Median Leverage.

Medium: Median Leverage > Leverage ≤ 80

^{th}Percentile Leverage.High: Leverage > 80

^{th}Percentile Leverage.

Profit:

Low: Profit ≤ 20

^{th}Percentile Profit.Medium: 20

^{th}Percentile Profit > Profit ≤ 80^{th}Percentile Profit.High: Profit > 20

^{th}Percentile Profit.

Investment:

Low: Investment ≤ Median Investment.

Medium: Median Investment > Investment ≤ 20

^{th}Percentile Investment.High: Investment > 80

^{th}Percentile Profit.

## Leverage Factor Return (high minus low - HML_{Leverage})

where:

Assets:

Small: Total Assets ≤ Median Total Assets.

Big: Total assets > Median Total Assets.

Leverage:

Low: Leverage ≤ Median Leverage.

High: Leverage > Median Leverage.

## Investment Factor Return (high minus low - HML_{Investment})

where:

Assets:

Small: Total Assets ≤ Median Total Assets.

Big: Total assets > Median Total Assets.

Investment:

Low: Investment ≤ Median Investment.

High: Investment > Median Investment.

## Profit Factor Return (high minus low - HML_{Profit})

where:

Assets:

Small: Total Assets ≤ Median Total Assets.

Big: Total assets > Median Total Assets.

Profit:

Low: Profit ≤ Median Profit.

High: Profit > Median Profit.

## Market Factor Return

Market Factor Return = average return across all companies.