These multi-factor ETFs provide advisors and investors direct access to hedge fund exposure inside an ETF vehicle. The underlying indices diversify risks that are less likely to be rewarded while overweighting areas that are more likely to produce positive results.
The underlying customized FTSE Russell indexing methodology selects components based on a diversified set of factor characteristics, such as relative valuation, price momentum and quality. The enhanced indexing process would allow the ETFs to exclude expensive, low quality companies with poor momentum, which could help the ETFs diminish drawdowns without sacrificing too much from any potential upside of a market recovery.
“The Russell 1000 Diversified Factor Index has a track record of delivering better risk-adjusted returns and capturing less of the downside versus its corresponding market cap-weighted index,” according to J.P. Morgan.
Financial advisors who are interested in learning more about factor investing to hedge risks can register for the Tuesday, February 27 webcast here.