We examine eight weighting schemes frequently used in the construction of systematic equity strategies. Through the lens of both returns- and holdings-based analysis, we highlight the importance of having a close link between security weights and market prices. Ignoring prices,
We examine eight weighting schemes frequently used in the construction of systematic equity strategies. Through the lens of both returns- and holdings-based analysis, we highlight the importance of having a close link between security weights and market prices. Ignoring prices,
In ten days, history will be made. As the anniversary of last March’s volatility draws near, this appears to be a mathematical certainty with practical implications. Let us explain. The scars of 2020 are multi-dimensional. Of course, society bears the
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,
Growth stocks have continued to outpace value stocks in the recent market volatility Quality Growth, a subset of the growth universe, has shown relative resilience in this selloff Experienced management teams, robust balance sheets, high return on capital and strong
Introduction Sustainable investing is under increased scrutiny, as a series of proposed and upcoming regulations start to take effect. The EU Action Plan: Financing Sustainable Growth now requires investment firms doing business in the EU to implement mandated Environmental, Social
Some strong firms may benefit from a delayed surge in demand. We believe investors should cast a wide net in the search for secular growth opportunities. Health care firms involved in diagnostics and bioprocessing have stayed largely out of the
Style rotations, where investors switch one type of investment style for another, are nothing new. At some point during most investment cycles different styles – such as growth, quality and value – will outperform at different points as investors rotate
Value investing has underperformed growth investing for over 13 years. We examine several narratives that suggest why the long-term efficacy of the value factor may be dead. Using a bootstrap analysis, we show the likelihood of observing such a large
No it’s not. Quite the opposite. I didn’t want to keep you in suspense. Now for some detail. My colleagues have written a great paper (IMHUO) examining the issue (and sharing this blog’s title). It goes without saying that we
Qontigo has introduced a new series of factor-based indices known as the STOXX® Factor Indices. These are designed for investors who want to take advantage of the benefits of reaping factor premia while avoiding the noise that pervades many other
Investors found few places to hide in the recent and sudden equity market drawdown. Even previously defensive, low-beta stocks weren’t exempt from losses. In this paper, we share our observations of an anomalous shift in equity betas across the market,
Blitz and Marchesini (2019) question the investability of factor indices and argue that active management is needed to avoid capacity issues. We show that these claims do not hold. Well-designed implementation rules avoid capacity problems that may arise with poorly
Factor investing requires a long-term perspective Talking about a demise of factors seems premature Active managers can add value through intelligent design
The current value–growth cycle has been particularly daunting for anyone with a value orientation. Value has been out of favor for approximately 12 years at this point. In this prolonged phase of growth dominance, the patience of investors in RAFI™
Four factors – value, carry, momentum and low risk – provide attractive risk-adjusted returns in the investment grade corporate bond market. Their outperformance cannot be explained by traditional risk-return drivers such as the term and default premium. Transaction costs can
Investors have been troubled by the region recently, with a growing feeling that it is mirroring Japan’s ‘lost decade’. But there are reasons to be positive about it, and we are bullish on defensive stocks which we believe are currently
Executive Summary: Risk premia strategies (for example Trend, Carry, Volatility and Value) have faced various headwinds since the 2008 financial crisis. Key drivers of the decline in the levels of premia include historically low interest rates, greater levels of un‐
Factor investing adoption continues at pace as asset owners pursue a long-term approach Some 59% of existing global factor investors plan to increase their allocations to factor investing strategies, and 66%-70% of respondents reported their factor investing strategies met or
Despite the challenging trade environment, equity prices remain near their highest levels in a decade in both the US and Europe. Volatility has remained relatively low, despite intermittent spikes, leading to increasing investor concerns around equity price sensitivity to geopolitical
Working out how much to invest and when to do so is something investors often agonise about just as much as where to put their money. Should you invest a lump sum and hope you’ve timed it right, or drip-feed
Active strategies’ relative performance in Q3 were slightly weaker than in Q2, though uneven across regions. Uncertainties soared early in Q3 with the breakup of the summer U.S.-China trade truce and bold British PM Johnson’s tactics. Later, signs of a
We recently conducted follow-up research to our 2010 study, Does Style Matter in Emerging Markets? and found that the style distinctions among investment managers that we originally identified have grown more pronounced, generating differentiated patterns of performance—patterns that, in some
Asset managers can lead in equity impact investing Assets in impact investing strategies more than doubled from 2018 to 2019, to USD 502 bn1 , targeting solutions for challenges including global poverty, water scarcity and climate change. We believe that
Why thematic investing? Traditional approaches to investing are constantly challenged by leading companies which are by nature innovative and, for most of them, multisectoral. Disruptors can be found in any sector or industry, making the traditional industry classification framework less
Our latest research reveals that when looking for outperforming managers, it’s generally helpful to look for active strategies with above-average active share and below-average turnover. Our previous research helped investors and financial advisors develop a framework for equity allocation and
This report adds institutional accounts to the mutual funds analyzed in the S&P Indices Versus Active (SPIVA) U.S. Scorecards. We also examine the impact of fees. Overall, underperformance among institutional equity accounts was not meaningfully different from that reported for
We have been through an extraordinary period of value factor underperformance over the last 18 months. The only comparable periods over the last 30 years are the Tech Bubble and the GFC. Historically, we would expect a very sharp reversal
Exchange-traded funds (ETFs) focused on low-volatility stocks have been popular with investors worried about global economic uncertainty and equity valuations. Yet it’s important for investors to understand exactly what they’re getting—and not getting—with low-volatility strategies.
Successful investors are a strange bunch. They can simultaneously hold in their minds multiple competing ideas. It is unusual to find a vivid imagination, nestled in steely analytics, set alongside a deep curiosity for human psychology. There is nature and
There is little doubt that over the last decade, investors with portfolios including indextracking strategies, have benefited from an environment in which cheap beta has thrived. However, GAM Investments’ Matthew Beesley questions whether the unrelenting appetite for passive investing could
For investors, biodiversity loss represents a risk to investment returns. For instance, companies which harm biodiversity through their activities will likely have to take on the punitive costs imposed on them because of their practices which harm the environment. In
Climate change scenario analysis seeks to understand the future impact of global warming. It is currently the leading edge of thinking for investors and businesses striving to assess how climate change will affect them. This has been driven in part
While September seems to have brought calmer markets at the headline level, beneath the surface this has not been the case. The past few weeks have seen momentum and growth trades come under pressure, with value outperforming growth by 4.1%
A robust and active trading ecosystem benefits asset owners and investment managers by fostering transparency, market efficiency, and investor confidence. This paper documents, for the first time, the extent and nature of that ecosystem for indices produced by S&P Dow
Smart Cities: Insights On A Powerful Trend Ivo Weinöhrl, Senior Investment Manager for Pictet's SmartCity strategy, explains how the powerful urbanisation trend is creating compelling investment opportunities.
Global equity markets posted their second losing month of 2019 in August as escalating trade tensions between the world’s largest economies unnerved investors. Developed markets retreated roughly 2% in the month, with Asian markets hit especially hard. International trade in
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
How changes in ESG ratings affect price Can you do well by doing good? Environmental, social and governance (ESG) investing has undeniably begun its ascent to the mainstream. This trend not only suggests investors are more readily prepared to pursue
As institutional investors, we have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role, we believe that environmental, social, and governance (ESG) issues can affect the performance of investment portfolios (to varying degrees
White Paper Introduction Whatever price multiple of which you are a fan, whichever sectors you exclude, however you neutralize your exposures, whether you equal-weight or cap-weight, one thing remains true: cheap stocks have had an unhappy decade.1 In some cases
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
THIS QUARTER, I FOCUS ON questions being raised about the benefits of investing outside the US and in value stocks. I’ll acknowledge up front that I’m a believer in both of these strategies, but I’ve tried to compensate for any
1 Actively understand the portfolio 2 Actively identify and combine different sources of return 3 Actively use the whole investment toolbox
We believe low-beta equity opportunities can be found across all global markets and sectors. Investing in these opportunities with traditional low-beta strategies can incur unintended risks from significant country, sector, and duration exposures versus cap-weighted benchmarks. Actively managed strategies can
Low-carbon and factor-based investing are two key trends in the global investment management industry. This paper investigates the impact of low-carbon screening on traditional market-cap-weighted portfolios and factor portfolios (quality, value, momentum, and low volatility) across seven Asian markets: Australia,
The concept of factor investing emerged at the end of the 2000s and has completely changed the landscape of equity investing. Today, institutional investors structure their strategic asset allocation around five risk factors: size, value, low beta, momentum and quality.
David Laibson discusses his findings on what types of strategies work best to encourage investors to exert selfcontrol, whether it may be saving more for retirement or resisting the impulse to sell into a falling market.
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
195 landen ondertekenden in 2015 het Klimaatakkoord van Parijs. Maar in 2018 tekenden slechts 20 staats- en regeringsleiders present op de COP 24. Klimaatverandering was naar verluidt slechts een theorie, maar kijk maar eens naar het weerbericht op tv. Verzekeringsmaatschappijen
