Multi-Factor, Characteristic Benchmarks and Equity Portfolios

Frankfurt am Main

Almost five years ago, MSCI introduced a new line of “multi-factor indexes” that took individual factors and created multi-factor combinations. This approach has provided investors with a simple, transparent and flexible way to adjust the weighting among factors as their investment objectives or expectations change. While working on those indexes, we identified a core set of four persistent equity factors: value, momentum, size, and volatility. Investors who believe that these four factors will continue to provide excess returns relative to the market will want to avoid dilution and gain maximum exposure to them.