Demonstration of Factor Investing using a Research Tool


Smart beta indexes have become increasingly popular in recent years, with nearly three-quarters of global institutional investors and asset owners now either using or evaluating smart beta index-based strategies for their portfolios.

Smart beta is a general term for indexes that are built using a variety of approaches other than the standard method of weighting index constituents by their market capitalization. Factor indexes capture exposures to academically recognized drivers of risk or reward (value, quality, size, low volatility and momentum), and help investors gain more control as they build portfolios toward achieving specific investment objectives.

In this CFA Lecture, Frances Brett from FTSE Russell will present on FTSE Russell's approach to building factor indices (both single and multi-factor) and use FTSE Russell's in-house research tool to demonstrate the factor exposures within market cap, alternatively weighted and factor indices. At the lecture you will be able to build indices using different combinations of factors and see the outcome on risk, return, macro exposures and underlying valuation ratios. Frances will also be able to share examples of the work FTSE Russell have been doing with European Asset Owners (Pension Schemes, Sovereign Wealth Funds etc) and explain current and expected future trends in Smart Beta.

With the rise of smart beta indexes, asset managers and their advisors are taking advantage of the growing range of related investment products. They are using them to build much more sophisticated portfolios than was possible even a few years ago. Plenty of debate surrounds factors both in the academic literature and the financial press and this interactive lecture is an excellent opportunity to understand more about factor investing.