2022 global survey findings from asset owners: By now, we’re all aware that sustainable investment isn’t a new phenomenon, idea or even a quick fix, but rather the current and future of investments. With that in mind, our findings demonstrate
Publicly listed corporations account for a significant share of global greenhouse gas emissions. We estimate that the Scope 1 and 2 emissions of listed large and mid-cap firms in developed and emerging economies account for approximately one fifth of all
As investors increasingly look to manage the carbon exposure in their portfolios, it is critical that they have the right tools. There are many ways investors can address the carbon exposure in their portfolios, including explicit …
Sovereign ESG revisited Introduction Although the use of sustainability metrics in sovereign fixed income markets is becoming more mainstream, there is a lack of consensus on how to appropriately assess countries’ Environmental, Social and Governance (ESG) performance. A particular challenge
The robust reopening rally in US stocks lost steam in Q3, mired by broad September losses, as investors recalibrated expectations for the US recovery, inflation and Fed policy support. Amid big swings in risk appetite and a late-quarter bondmarket selloff,
Investors who want to incorporate ESG considerations into a broad US market passive portfolio have traditionally had to accept a certain (often high) level of deviation from the risk and return characteristics of the underlying benchmark.
Institutional investors often pose the question of how factors perform across economic cycles. The concept of a normalized cycle has come under pressure in the post-Global Financial Crisis (GFC) era that has seen sustained quantitative easing (QE), financial repression and lower …
Deeper knowledge about how indexes work can drive better portfolio outcomes for wealth advisors Because an index is a hypothetical basket of securities, it cannot be invested in directly. However, indexes are often licensed by fund managers to be used
This paper discusses how: multiple SI objectives can be incorporated in an index in a transparent and flexible manner. the Target Exposure methodology is an evolution of FTSE Russell’s tilting methodology, which fits well with the increasing demand for index
The greening of the global economy presents significant opportunities. However, investors and policymakers face a common challenge: How can green business activities be systematically identified, categorized, and measured across diverse sectors, supply chains and asset classes to mobilize investment at
Climate transition benchmarks have become a focal point for investors looking to integrate climate risks into their portfolios and align them with the climate goals of the Paris Agreement (or "Paris-aligned" benchmarks). This has fueled an active interest among investor
Factor control: Isolating specific biases in ESG ratings Based on the FTSE Russell ESG scores, which cover nearly 4,700 companies, this report provides a) a deep analysis of the three external factors (or biases)—size, activity and country—that historically may have
The greening of the global economy presents significant opportunities to investors. However, investors and policymakers face a common challenge: How can green business activities be systematically identified, categorized …
Back in 2017, when we first asked questions to ascertain if asset owners were thinking of applying sustainability considerations to smart beta, we were surprised to find out …
While exposure to the real estate asset class is common in defined benefit (DB) plans, this has only become a more recent occurrence in defined contribution (DC) plans. Many target date funds (TDFs) have now started to provide exposure to
This paper presents the results of a FTSE Russell study examining the creation of a climate-focused FTSE All-World Paris-aligned Benchmark (PAB) Index. Such a benchmark is intended to satisfy the requirements for an EU Paris-aligned …
Since the free-market reforms of the late-1970s, the Chinese economy has been transformed from an agrarian base to a manufacturing led economy, averaging 9.5% GDP growth from 1979 to 2018. 1 China issued foreign bonds from 1861- 1950 to finance
The decision over which factors to allocate to, and in what magnitude, has a significant impact on investment outcomes and is an important consideration for investors employing a factor approach to achieve investment objectives. It is analogous to the asset
Cycle, Further, Interrupted. The COVID-19 virus has stalled the mini-cycle rebound and made a global recession likely. While the duration of the virus pandemic is unpredictable, policy stimulus, pent-up demand and a lack of major imbalances argue for a solid
Factor strategies differ significantly in terms of portfolio construction. There is much debate regarding the pros and cons of alternative construction approaches. A vigorous debate has unfurled over the best way to combine factors into a single portfolio, with some
Factor portfolio construction Most portfolio construction methodologies have some mechanism that permits the levels of factor exposure to be ratcheted up and down; however, factor exposure is rarely the main objective and an alternative decision metric is commonly employed. Examples
Eurozone This paper explores the investment impact of the large and persistent home bias in the equity allocations of the five largest European pension fund markets since the global financial crisis. For this study, we examined the characteristics, performance and
How is the tension between the US and China affecting the appetite for investing in Emerging Market equities – what are the global implications? Tension, Tariffs and Trade Wars The role of China in emerging markets Evaluating the impact of
Questions and Answers FTSE Russell has produced a series of papers that examine topical factor investing issues. This note consolidates the main findings. Readers interested in the details are encouraged to refer to the original papers [1, 2, 3, 4].
This paper assesses both the extent and impact of home bias in the equity allocation of five large pension fund markets by examining the characteristics, performance and return/risk profiles of each market. The findings reveal interesting variations in the impact
In this paper, we introduce the notions of climate risks and how they would translate into sovereign risk. Physical risks correspond to the potential economic and financial losses caused by climate-related hazards and are divided in two categories: acute hazards
Characteristics, historical performance and differences between the current credit cycle and earlier regimes A Fallen Angel (FA) is a corporate, or sovereign, bond downgraded from Investment Grade (IG) (minimum rating of BBB- with S&P, Moody’s or Fitch) to a High
Saudi Arabia is projected to have an index weight within FTSE Global Equity Index Series (GEIS) of 0.31% and 2.86% within the FTSE Emerging All Cap Index (see Q16). Due to this projected size in the Emerging index, FTSE Russell
How are defensive market strategies evolving today? Volatility is higher than in 2017, but not in a long-term context Brexit has been more concerning to investors than the China-US trade wars Investors are not driven to change strategy according to
The Russell US Indexes were created in 1984 by the Frank Russell Company (now part of FTSE Russell) with the goal of providing accurate representation of the investable US equity market. When initially introduced, the Russell indexes provided five years
In this note, we illustrate that capitalization weighting, equal weighting and inverse market-capitalization weighting schemes are special cases of a more general class of factor tilt indexes that embed specific and explicit levels of size exposure. This is of direct relevance
For the last six years we’ve conducted and published the FTSE Russell Smart Beta survey of asset owners. With each passing year we learn more details about asset owners’ awareness, attitudes and behavior related to smart beta, and we continue
FTSE Russell is proud to present the sixth annual survey of global institutional asset owners’ attitudes toward evaluation and adoption of smart beta. Each year we have surveyed decision makers across a broad spectrum of AUM tiers and organizational types
FTSE Fixed Income Factor Research Series As a well-known concept to practitioners and academics, carry has been leveraged in the currency markets for decades. With the understanding of such FX carry trades becoming established, recent academic publications have explored this
Introduction Factor investing is increasingly in vogue with estimates of passive assets tracking such strategies reaching US$729bn [1], [2]. This popularity has led investors, academics and practitioners to question the extent to which factor premiums may have been arbitraged away
With the increased availability of non-cap-weighted indexes, investors can now make more efficient allocation decisions by more precisely mapping their investment goals and constraints to the strategies used to build their portfolios. This requires a deep understanding of their investment
Climate change poses clear and material risks to real estate assets with the potential to impact return profiles. This paper focuses on listed real estate, which historically has lacked appropriate tools to allow investors to assess their exposure to climate
In this paper we undertake a theoretical comparison of the exposure and diversification outcomes of multi-factor portfolios that use a Composite Index, a Composite Factor and a Multiple Tilt approach to index construction. A Composite Index is characterized as a
Points Of Discussion Factors allow for a high level of portfolio customization at a reasonable cost It is important that investors understand the factor exposures they need and have a flexible investment process Factors such as value, size, and momentum,
China A to be assigned Secondary Emerging market status commencing June 2019 Iceland to be assigned Frontier market status in September 2019 Romania to be retained on the Watch List as a Frontier market New additions to the Watch List:
The academic literature tells us that for suitably diversified portfolios, factors drive risk and performance outcomes (see for example [1, 2]). If this is the case, then well-diversified portfolios with identical factor exposures should have similar performance characteristics despite originating
Since the introduction of economic reforms some 50 years ago, China’s economy has metamorphosed into a formidable driver of global growth as it opens its market to international investors. This growth has been driven by decades of policy and economic
Insights from the 2014-2018 FTSE Russell global smart beta surveys This is the 5th year of the FTSE Russell smart beta global asset owner survey. This milestone presents an opportunity to look back and reflect on how smart beta indexes
Executive summary Until now the transition to a sustainable and “green” economy1 has been a loose concept rather than a defined, investable, industrial system. This lack of definition and data has led to the impression that it is of limited
2018 STEP Change Report Growing numbers of asset owners, asset managers and others involved in the investment chain now routinely consider stewardship and sustainability themes as core investment priorities. Around the world, they are taking action to integrate sustainability themes
Until now the transition to a sustainable and “green” economy1 has been a loose conceptratherthan a defined, investable, industrial system. This lack of definition and data has led to the impression that itis of limited size; small cap dominated; lacking
FTSE Russell is proud to present the fifth annual survey of global institutional asset owners’ attitudes toward evaluation and adoption of smart beta. Each year we have surveyed decision makers across a broad spectrum of AUM tiers and organizational types
The first quarter came in like a lamb and went out like a lion. At the beginning of the year, stocks recorded a string of record highs as the market absorbed the benefits of reduced tax rates that had just
The China equity market landscape has changed dramatically since FTSE Russell became the first international index provider to launch mainland indexes back in 2001. The number of Chinese listings domestically and abroad has grown rapidly as has its share of
FTSE Russell announced the classification of Saudi Arabia as a Secondary Emerging market within the FTSE Global Equity Index Series (GEIS) on March 28, 2018, as part of the Country Classification Interim Update. The Kingdom’s entry into the international equity
