Indexation, Smart Beta and Factor Investing
Investments into the global ETFs industry continue apace, with over $300 billion of net inflows in Q1 2022, taking the total to over $10 trillion across more than 10,000 products. Active ETFs and ETPs attracted net inflows of $32.97 billion in Q1, indicating that most fund flows continue to be into passive or indexed vehicles. But is the tide beginning to turn for smart beta products? In its latest annual survey of European investors, EDHEC-Risk Institute found that there was a slowdown in the use or potential use of smart beta and factor investing strategies.
The first issue of The Journal of Beta Investing Strategies, formerly The Journal of Index Investing, pays tribute to Jack Bogle and his influence on index investing.
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Federated Hermes suggests that slower growth, higher inflation, and a reversion to normal monetary conditions offer the right conditions for a rotation from growth to value stocks.
Columbia Threadneedle reviews a model used to break down sources of market return into individual components and offers insights into how investors might consider using such a methodology for portfolio reallocation.
Qontigo argues that a multi-factor approach might be something investors should consider using as all style factors offer excess returns over time, but not all at the same time.
Dimensional Fund Advisors suggest that systematic approaches in fixed income, such as those used in equity factor investing, may become more widely adopted by bond investors. Information contained in forward rates appears to contain exploitable alpha.
EDHEC-Risk Institute's 2021 survey finds a slowdown in the use of smart beta and factor investing strategies.
In this paper PGIM Quantitative Solutions argues that there remain plenty of opportunities within value stocks.
This paper illustrates that the highest returns from value investing don't always have to come from investing in small caps, and how equally weighted large cap index produced statistically similar results, but without the liquidity issues often present amongst the smaller stocks.
Verdad's paper investigates several of the drivers of performance from deep value international stocks.
In this video, S&P Dow Jones Indices experts discuss how over 30 years of factor index performance data helps investors make better-informed decisions, and how it contributes to the understanding of the value of active managers.
The authors explain how equity factor strategies decay over time, which informs the optimal rebalancing period.