Saudi Arabia urges stronger global action to protect children in cyberspace at UN    911 emergency centers handle over 2.8 million calls in March    Musk's X is suing India, as Tesla and Starlink plan entry    Tesla sales plunge after backlash against Elon Musk    Saudi Arabia posts SR49.8 billion travel surplus in 2024 as visitor spending hits SR153.6 billion    World leaders call Trump tariffs 'wrong' and 'unjustified'    Israel announces expansion of military operation in Gaza to seize 'large areas' of land    US cancels visa of Nobel Peace Prize winner Oscar Arias    Danish prime minister refutes US claim on Greenland on visit to the Arctic territory    Aubameyang fires Al Qadsiah into King's Cup final with stoppage-time winner over Al Raed    Cristiano Ronaldo joins Fatal Fury: City of the Wolves    Saudi Arabia welcomes trilateral border treaty between Tajikistan, Kyrgyzstan, and Uzbekistan    Swedish table tennis legend Jörgen Persson appointed head coach of Saudi national team    Danilo Pereira fires Al Ittihad into King's Cup final with dramatic stoppage-time double    Tebuk emir reviews rain response in Tayma    Saudi Arabia considers rent cap as part of major real estate reforms    Screen time in bed linked to insomnia, study finds    Mexico bans junk food in schools to fight childhood obesity epidemic    Sweet sales surge ahead of Eid as Saudi chocolate imports top 123 million kg in 2024    Saudi creatives shine at Jeddah's Fawanees Nights with art, fashion, and storytelling    Bollywood actress vindicated over boyfriend's death after media hounding    Grand Mufti rules against posting prayers and preaching in mosques on social media    King Salman prays for peace and stability for Palestinians in Ramadan message King reaffirms Saudi Arabia's commitment to serving the Two Holy Mosques and pilgrims    Bollywood star Saif Ali Khan 'out of danger' after attack at home in Mumbai    Exotic Taif Roses Simulation Performed at Taif Rose Festival    Asian shares mixed Tuesday    Weather Forecast for Tuesday    Saudi Tourism Authority Participates in Arabian Travel Market Exhibition in Dubai    Minister of Industry Announces 50 Investment Opportunities Worth over SAR 96 Billion in Machinery, Equipment Sector    HRH Crown Prince Offers Condolences to Crown Prince of Kuwait on Death of Sheikh Fawaz Salman Abdullah Al-Ali Al-Malek Al-Sabah    HRH Crown Prince Congratulates Santiago Peña on Winning Presidential Election in Paraguay    SDAIA Launches 1st Phase of 'Elevate Program' to Train 1,000 Women on Data, AI    41 Saudi Citizens and 171 Others from Brotherly and Friendly Countries Arrive in Saudi Arabia from Sudan    Saudi Arabia Hosts 1st Meeting of Arab Authorities Controlling Medicines    General Directorate of Narcotics Control Foils Attempt to Smuggle over 5 Million Amphetamine Pills    NAVI Javelins Crowned as Champions of Women's Counter-Strike: Global Offensive (CS:GO) Competitions    Saudi Karate Team Wins Four Medals in World Youth League Championship    Third Edition of FIFA Forward Program Kicks off in Riyadh    Evacuated from Sudan, 187 Nationals from Several Countries Arrive in Jeddah    SPA Documents Thajjud Prayer at Prophet's Mosque in Madinah    SFDA Recommends to Test Blood Sugar at Home Two or Three Hours after Meals    SFDA Offers Various Recommendations for Safe Food Frying    SFDA Provides Five Tips for Using Home Blood Pressure Monitor    SFDA: Instant Soup Contains Large Amounts of Salt    Mawani: New shipping service to connect Jubail Commercial Port to 11 global ports    Custodian of the Two Holy Mosques Delivers Speech to Pilgrims, Citizens, Residents and Muslims around the World    Sheikh Al-Issa in Arafah's Sermon: Allaah Blessed You by Making It Easy for You to Carry out This Obligation. Thus, Ensure Following the Guidance of Your Prophet    Custodian of the Two Holy Mosques addresses citizens and all Muslims on the occasion of the Holy month of Ramadan    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Adoption of factor investing increases
Published in The Saudi Gazette on 22 - 10 - 2019

Investors employing factor strategies are continuing to increase their factor allocations, the fourth Invesco Global Factor Investing Study has found. The study, the largest of its kind, conducted face-to-face interviews with 241 global institutional and wholesale factor investors responsible for managing over $25 trillion in assets.
This year's study provides deeper insight into the paths of adoption, experiences, methods of implementation, future intentions and challenges to be overcome in factor investing. Nearly half (45%) of the investors surveyed in APAC, EMEA and North America increased factor allocations in 2019. Average allocations to factor investing strategies have increased from 2018 to 2019 for both institutional (16% to 18%) and wholesale (11% to 14%) investors globally. In EMEA, 59% of the respondents plan to increase their allocations over the next three years. (Figure 1) Also nearly 70% of respondents have also reported that their factor investing performance met or exceeded expectations in 2019.
With factor investing, investors look to improve risk and return expectations for their portfolios by targeting specific performance characteristics of a security. The study found that respondents have continued to increase both the number of factors they target and their usage of multi-factor strategies. They have also taken more active decisions about which factors to include or exclude. One of the results is a reduction in exposure to the value factor (one of the first and most widely adopted factors) and a concurrent increase in the use of other factors such as momentum, quality and low volatility. Despite some questioning whether the value factor remains as effective, it continues to be the factor with the widest level of support among both global wholesale (91%) and institutional investors (86%).
Georg Elsaesser, Senior Portfolio Manager, Quantitative Strategies at Invesco, said: "The movement of factor investing toward the mainstream continues at pace. Early adopters want to do more with their factor allocations, including active and customized approaches and expanding to fixed income. Existing factor investors have been increasing allocations with over half of the respondents in the study intending to increase allocations over the next three years, this pattern of adoption is likely to continue."
Zainab Kufaishi, Invesco's head of institutional business for the Middle East and Africa, said: "We have seen a steady increase in the number of investors in the Middle East turning to factor investing to better manage their portfolios. Reducing risk, enhancing return and reducing costs continue to be the three most important factors driving adoption in the region. Most investors who have deployed factor strategies have taken a long-term view, though believe that capturing the benefits of factor investing is in part dependent on a dynamic approach to implementation."
This year's study found that a 3-to-1 majority of factor investors now choose an active implementation approach as opposed to a passive one – with active strategies executed through segregated mandates, co-mingled mutual funds and exchange traded products (ETPs).
For active implementation, the study found, there is a preference for segregated mandates among larger institutional and wholesale investors, while mid-sized and small investors are more likely to opt for co-mingled mutual funds. Notably the use of ETPs is not limited to one type of investor or to just the implementation of passive strategies. These products play an important part in the implementation of active strategies for nearly 43% of large institutional investors usually in combination with other types of vehicles.
And where investors still implement strategies passively via a factor index, almost half of respondents (42% institutional and 44% wholesale) prefer a custom approach to standard index design. These custom approaches may offer better management of factors and more control over factor definitions and metrics.
Investors view success in factor investing as being contingent on constant evolution through the introduction of new factors, definitions, data sources, technologies and asset classes.
The past 12 months have seen a notable increase in the proportion of respondents who believe factor investing can be extended to fixed income. Globally, some 70% of institutional investors and 78% of wholesalers now view the approach as being applicable, up from 62% and 57% respectively in 2018.
With yields now at record lows and around a quarter of bonds globally trading with negative yields, attention has turned to alternative ways of adding value from the asset class. Respondents saw factor investing as a solution that could target sources of returns transparently and cost effectively even in the current environment.
64% of investors identify yield / carry as the top factor that can be identified in fixed income, partly explaining the increase to such strategies over the past 12 months, followed by liquidity, value and quality (54%, 46% and 42% respectively).
Despite demand for the application of factor strategies within fixed income, a shortage of appropriate products is still evident, with nearly nine in ten respondents describing this asset class as not well covered by current factor offerings (this reflects perceptions of coverage in terms of quality, not just quantity). As such, some 42% of institutional investors added to equity factors in 2019, while 35% added to fixed income factors. For wholesalers, the figures were 46% and 32% respectively.
Zainab Kufaishi added: "This year's results suggest that as regional investors become more experienced in factor investing, the demand for fixed income factor strategies is rising. Yet challenges remain as investors believe their product needs in fixed income are not yet adequately addressed."
ESG considerations impact factor investing strategies
Looking ahead at market developments, this year's study found large numbers of global and regional investors incorporating Environmental, Social, and Governance ("ESG") considerations alongside factors – some 85% of respondents are doing so in parallel (and nearly half believe that ESG adoption complements factor investing adoption.
However, it is an area where many asset owners are uncertain about the interaction of ESG and factor initiatives. Over a quarter (28%) of institutional investors see ESG as a factor in its own right, while 40% see ESG as a combination of factors. To understand these issues better, asset owners need assistance from external partners, given the complexity of analysis and a lack of readily available data and tools.
Zainab Kufaishi concluded: "Overall, our latest Global Factor Investing Study shows rising commitment to factor strategies among large institutional investors in the region. The fact that factor allocations are continuing to spread across portfolios suggests it is gaining a strategic footing in investing, not just as a low-cost substitute for traditional active management, but as a more transparent and efficient tool for building a holistic portfolio." — SG


Clic here to read the story from its source.