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Equity Investing: Trends, Factors and Outlook

Active equity managers are operating in an era where technology is advancing rapidly and investors are increasingly adopting lower-cost vehicles for their equity exposure.

In the list below, we round up some of the best recent papers to explore current trends and the future of equity investment management. We finish with some of the best recent papers on the investment outlook. 



Aberration or Premonition: Equity Trends and Future Prospects (Baillie Gifford)

Sometimes, the key to investment returns is to capture extrems. With this in mind, Baillie Gifford's James Anderson sets out how we can improve our chances of investing well. He highlights the exponential long-term trends in energy, healthcare and technology that he believes will be at the heart of a dramatic implosion of the old order and will become the cornerstone of the new.’

The Future of Investment Management (CFA Institute Research Foundation, 2018)

Ronald Kahn of BlackRock examines active equity management and the future of the investment industry. We live In an era where technology is advancing rapidly and investors are increasingly utilising lower-cost vehicles, such as indexed funds and ETFs for their equity exposure. What are the implications for the future of equity portfolio management?

Forecasting Long-Term Equity Trends: A Comparison of Popular Methodologies (PGIM Institutional Advisory & Solutions, 2018)

For compliance reasons, this paper is only accessible in the United States

Many investors need to make long-term asset class forecasts for planning and portfolio construction purposes. In this 16-page paper by PGIM, the authors examine the empirical performance of two different approaches to forecasting future ten-year equity returns: a regression methodology using CAPE and a more traditional “building block” approach.

European Equities: Selecting Indices to generate better performance (Lyxor ETF)

For compliance reasons, this paper is only accessible in the UK & Europe

This 40 page document provides a comprehensive overview of the characteristics of European equity indices, covering broad, country, sector and thematic indices. The report examines fund flows and investor sentiment, providing guidance in the use of ETFs to efficiently capture index returns.

Superstars: The firms, sectors, and cities leading the global economy (McKinsey)

This 57-page report by McKinsey examines the "superstar effect" across companies, industry sectors and geographies. What are the defining characteristics of "superstars", how can investors identify future unicorns, and how should this impact equity portfolio management?


Signs of Equity Market Strain - Market Stress Monitor (Intech, Dec 2018)

For compliance reasons, this paper is only accessible in certain geographies

A common challenge for investors is to identify catalysts which may cause an investment metric to revert to the mean. In this white paper, Intech shares the results of its research to identify reliable indicators of market strain and instablity. These new metrics are intended to help investors understand different risk regimes and to identify higher tail-risks, thereby complementing fundamental risk indicators, such as market valuation.

Invesco Global Factor Investing Study 2018

Invesco's annual Global Factor Investing Study is believed to be the largest in-depth global survey of factor investing currently undertaken. It is built around the results of over 300 detailed interviews with a range of asset owners, investment consultants and wholesale investors.

Fact, Fiction, and the Size Effect (AQR Capital Management, 2018)

The "size effect" is based on the discovery that small cap equities have better long-run, risk-adjusted returns than larger stocks. In this paper, AQR uses publicly available data to examine the facts about the size effect, aiming to clarify and correct some misunderstandings.

Smarter Beta via Optimization and Custom Risk Modelling (Axioma, Oct 2018)

Axioma describes a process they have developed to harvest risk premia from the key equity risk factors, while avoiding unintended exposures that could potentially reduce returns.

The State of Quantitative Equity Investing (CFA Institute Research Foundation)

This 70-page report considers the dynamics of quantitative equity management in an era of factor investing, big data and fast-moving technology.


2019 Investment Outlook: Rising Above the Business Cycle (PineBridge, Nov 2018)

Strategists at PineBridge Investments present their 2019 Investment Outlook, divided into 4 sections which cover the macroeconomic perspective and purviews into investment strategy outlooks for multi-asset, fixed income, and equity investors.

BlackRock’s Global Equity Outlook (BlackRock, Nov 2018)

For compliance reasons, this paper is only accessible in the United States

BlackRock presents their outlook for global equities, against a backdrop where the growing US-China cold war casts a shadow over global economic trade. The outlook for tech stocks in particular is considered.

Investment Commentary Q4 2018: 3 ways the world could turn (Hermes IM)

For compliance reasons, this paper is NOT accessible in the United States

In their Q4 commentary, Hermes set out three possible scenarios that could play out in the short-medium term; the Goldilocks economic landscape, a world of divergent growth amongst controllable trade tensions, or a full blooded crisis and trade war.

2019 Global Market Outlook: Not Over Until It's Over (State Street Global Advisors)

State Street Global Advisors sets out three big equity market themes for 2019, advising equity investors to position themselves defensively in order to mitigate the impact of late-cycle market volatility.