In 2016, we published a controversial paper titled “How Can ‘Smart Beta’ Go Horribly Wrong?”, the first in a series of papers we would publish over the next 18 months on the future of factor investing and other forms of
In our latest Money Monitor report, we share a comprehensive analysis of flows in European openended funds and ETFs. We also look at the main investment trends observed over the past month. Key takeaways: The increased anxiety brought by the
In our Money Monitor report, we provide a comprehensive flow analysis in European open-ended funds and ETFs. We also look at the main investment trends observed over the past month. Key takeaways: September proved challenging for investors. They faced increased
Welcome to our fifth annual Global Factor Investing Study, based on an interview programme with 238 factor investors. This study incorporates the views of 138 institutional investors and 100 wholesale investors that are together responsible for managing over US$25.4 trillion
Smart Beta strategies, such as low volatility, can allow investors to modify their portfolios to better reflect their ongoing return-risk appetite in their strategic allocation. It is possible to build defensiveness into portfolios, while maintaining a degree of upside potential,
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 …
How the Bond Market Impacts Equity Factor Investing Markets have reached a 140-year low in U.S. interest rates. The collapse of rates since the Global Financial Crisis (GFC) has altered the nature of factor investing. Factor returns have been affected
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
In brief Negative returns to Value factors over the past ten years might lead one to conclude that such factors' returns will also be challenged going forward. Momentum has had relatively better returns over the same period but has also
Not So Much… Equity markets around the globe prospered in 2019, as investors were buoyed by the de-escalation of the US-China trade war towards the end of the year, central bank easing around the world—including three interest-rate cuts by the
Commentary Despite slowing growth and Britain’s ongoing struggles to map an exit from the E.U., central bank stimulus and falling yields helped European equities to mark their best year since 2009. The benchmark S&P Europe 350 rose 6% in the
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].
Key Points Performance backtests are often used as evidence to “prove” a smart beta strategy is “better” than its competitors. In our view, careful attention must be given to these claims because backtested results are easily data mined. The historical
Smart beta direct indexing is an increasingly accessible implementation route that accommodates tax-loss harvesting and customizations based on client preferences and circumstances. Advisors are uniquely positioned to assess whether this approach fits into their clients’ portfolios, and if so, to
At State Street Global Advisors, our baseline call in 2019 was for investors to continue to favour US equities, based on supportive monetary and fiscal policy and a contained inflation outlook. We cautioned investors to beware of volatility, on expectations
Factor investing has never been as popular as it is today. However, with the propagation of this type of investment approach, the equity space is becoming increasingly saturated with more and more factors that are ever more removed from academically-grounded
Using transparent and replicable estimates of stocks’ effective spread, we compute transaction cost levels and net performance of investable smart beta indices. We show that the extra performance relative to the broad cap-weighted index does not disappear once we account
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
6 steps to a better portfolio After a disappointing year in 2018, active managers have bounced back to a degree, notably in fixed income.
All the risk factors delivered absolute and risk-adjusted quintile return spreads, with the low volatility, value, and high dividend portfolios generating the highest risk-adjusted return spreads. All the Chinese factor indices offered by S&P DJI, except the momentum index, generated
Alpha Research, asset allocatie & fund selection & OpinioPro (professional investment publications databank) organiseerden een kennis event over Factor Beleggen & Smart Beta: active of passive met resultaten van haar analyse van Factor Investing publicaties van grote vermogensbeheerders en 381
Alpha Research, asset allocatie & fund selection & OpinioPro (professional investment publications databank) organiseerden een kennis event over Factor Beleggen & Smart Beta: active of passive met resultaten van haar analyse van Factor Investing publicaties van grote vermogensbeheerders en 381
Using Low Volatility Portfolios To Adjust Risk-Return Characteristics Equity investors can fundamentally change the risk-return profile of their overall portfolio by moving some of the core equity allocation into a Low Volatility portfolio. Historically, blending an S&P 500 portfolio with
Strategy Espresso While global growth is expected to slow in 2019, we feel that US equities are still the place to be due to relatively strong earnings and fairly robust economic data. However, investors should be cognisant of the volatility associated
Themes from the quarterly Quantitative Beta Research Summit The factors that we favor were mixed amid a turbulent quarter that saw a wide range of markets fall sharply and end the year in negative territory. A slowdown in economic activity
This paper is devoted to the question of optimal portfolio construction for equity factor investing. The first part of the paper focusses on how to make sure that a given equity portfolio has the targeted factor exposures, even before imposing
The negative gap between investor returns and fund returns is the biggest failure in investment management. Alpha is only a sideshow. If we extrapolate the investor returns gap to smart beta strategies, poor client timing will completely negate the potential
Factor investing Factor investing, an investment approach which targets specific stock characteristics such as value or momentum, is becoming a stronghold of investor portfolios.1 Many factor-investing strategies are popular for good reason: they are transparent, offer exposure to widely agreed-upon
Are We Past The Most Challenging Times for Emerging Markets? Emerging markets endured some turbulence after the aggressive trade war rhetoric surprised the markets in February this year. Since then, things have changed. Emerging market economic surprise indicators fell from
Year to date, small caps (as measured by the Russell 2000 Index) have outperformed all other caps in the US equity markets.1 In the current environment, we see a range of supportive factors for small caps, and as such we believe
Introduction Many Smart Beta ETFs are bought with the expectation of long-term market outperformance. The factors that many are based on have been proven both academically and empirically to produce excess returns. However, especially in the short-term, many of these
Strategy espresso Last week the US-China trade war escalated further. The US Treasury published an additional list of Chinese products worth $200 billion that may be subject to a 10% tariff. The new tariffs would be in addition to the
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
In this paper, we explore two questions: Has price momentum continued to work since Jagadeesh/Titman published their paper in 1993? Where is price momentum most effective and in what form? In this paper, we explore two questions: Almost a quarter
The rapid growth of smart beta strategies in recent years has provided our clients with a powerful new tool in their search for better returns, but it has also sowed quite a bit of confusion. Here, Stacie Mintz, portfolio manager
The rapid growth of smart beta strategies in recent years has provided our clients with a powerful new tool in their search for better returns, but it has also sowed quite a bit of confusion. Here, Stacie Mintz, portfolio manager
With a million dollars to invest today, would you rather buy a portfolio of New York City taxi medallions or shares in Uber stock? When we ask investing audiences this question, the answer is almost always Uber. People tend to
With a wealth of smart beta indices to choose from, market participants may find it difficult to decide when each factor-based strategy is best suited to deliver returns. Is it wise to rely solely on the performance of one factor?
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
Pick the Right One! Presentation Adisor Symposium
Mixing versus Integrating Equity factor premiums have been extensively researched and docu- mented. Due to rapid advancements in smart beta product offerings in recent years, exposure to premiums beyond the traditional market beta is now widely available at very low
The intelligence that guides our investment decisions Equity factor premiums have been extensively researched and docu- mented. Due to rapid advancements in smart beta product offerings in recent years, exposure to premiums beyond the traditional market beta is now widely
Strategy Selection While somewhat at odds with today’s big-data, warp-speed approach to life and work, thoughtful craftsmanship—the product design and implementation elements that are tangible, measurable, and impactful—can create positive, persistent results in portfolio performance. Investors seeking to add smart
New dimensions of diversification The concept that investors could earn a positive return by holding a sufficiently representative cross-section of stocks dates from the launch of the first index fund, in 1975. In the four decades since, index investing has
With the QE regime coming to an end, so is the suppression of asset price dispersion. BlueBay’s head of credit strategy and asset allocation David Riley looks at capturing alpha as the economic environment turns on the beta trade. 20
Lyxor ETF Research European Smart Beta ETF market inflows recovered significantly in Q4 2017 to €909M, after the low reached in Q3 (€555m). That said, Net New Assets stood at €5.0bn at the end of December, which was below their
Beyond Active And Passive The rising popularity of Smart Beta strategies has shaken up the investment world. Are they passive? Or are they active? How do they work? Do they work? These are just some of the questions posed by
Burton Malkiel For over four decades, Burton Malkiel has advocated for broad passive exposure to financial markets. More recently however, this Princeton professor and author of the best-seller book ‘A random walk down Wall Street’ has also been recommending a
