Blending Quality, Value, Momentum, Size and Minimum Volatility

The investment premium historically offered by market factors such as quality, value, momentum, size, and minimum volatility, has attracted many investors who are seeking to diversify their traditional equity portfolio allocations, but these factors have also followed cyclical trends of their own. Alternatively, we can turn to multiple-factor strategies that seek to combine these various stock characteristics to diversify and serve as a core of the portfolio.

In the upcoming webcast, Blending Quality, Value, Momentum, Size and Minimum Volatility, Robert Hum, Director, US Head of Factor ETFs, iShares by BlackRock; Doug Walters, Chief Investment Officer, Strategic Financial Services; and Arun Singhal, Managing Director, Index Product Management, Qontigo, will highlight historical drivers of returns and outline a strategy that provides exposure to rewarded factors while aiming to maintain a controlled level of active risk relative to the market cap benchmark.

Specifically, something like the iShares US Equity Factor ETF (LRGF), which follows the STOXX US Equity Factor Index, looks beyond standard market exposures, utilizing characteristics such as value, quality, momentum, low size, and low volatility to drive performance. The underlying smart beta indexing methodology combines traditional factor metrics such as dividend yields, gross profitability, and price momentum with newly identified analytics to enable deeper access to each of these five factors.

LRGF’s strategy can be seen as an alternative to traditional long-term U.S. stock holdings when seeking outperformance over the long term.

The iShares US Equity Factor ETF “seeks to enhance the core by providing exposure to rewarded factors while aiming to maintain a controlled level of active risk relative to the market cap benchmark,” according to BlackRock’s iShares.

The diversified portfolio specifically targets stocks that tilts towards five historical drivers of returns: value, quality, momentum, low volatility, and small size. Specifically, the Quality factor focuses on profitable firms that are efficient with capital. The Value factor targets stocks that are inexpensive relative to fundamentals. The Momentum factor includes stocks with positive price trends. The Size factor focuses on smaller, more nimble companies. Lastly, the Minimum Volatility targets lower risk, less volatile securities.

Along with the iShares US Equity Factor ETF, ETF investors can also target other market segments with the multifactor lens through the iShares International Equity Factor ETF (INTF), the iShares MSCI USA Small-Cap Multifactor ETF (SMLF) and the iShares MSCI Emerging Markets Multifactor ETF (EMGF).

Financial advisors who are interested in learning more about the multifactor strategy can register for the Monday, November 28 webcast here.

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