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Indexation and Factor Investing

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 Journal of Beta Investment Strategies (Portfolio Management Research, 2022)

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.

Spectrum Q1 2022: The great rotation 2.0 (Federated Hermes)

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

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. 

Occam's Razor and Portfolio Rebalancing (Columbia Threadneedle, Feb 2022)

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. 

Diversification Benefits of a Multi-Factor Index Approach (Qontigo, 2022)

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.

Factors Can Help in Bond Investing (Dimensional Fund Advisors, Apr 2022)

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.

European ETF, Smart Beta & Factor Investing Survey (EDHEC-Risk Institute, 2022)

EDHEC-Risk Institute's 2021 survey finds a slowdown in the use of smart beta and factor investing strategies.

Dynamic Value Factor Weighting (PGIM Quantitative Solutions, Apr 2022)

In this paper PGIM Quantitative Solutions argues that there remain plenty of opportunities within value stocks.

Long-Only Value Investing: Does size matter? (2022)

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.

The Drivers of Deep Value: International evidence (Verdad, 2022)

Verdad's paper investigates several of the drivers of performance from deep value international stocks.

Video: Finding a Factor Fit (S&P Dow Jones Indices, Apr 2022)

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.

Factor Information Decay: A Global Study (2021)

The authors explain how equity factor strategies decay over time, which informs the optimal rebalancing period.