Investors have been acquainted with styles or investing in asset categories for many years, and ETF providers have taken this investment approach to the next step through factor-based or smart beta strategies.
“The idea was: let’s experiment with some of these other factors – low volatility, momentum, quality, for example, and we’ve really kind of started with a very complicated multi-factor approach,” Dan Draper, Managing Director and Global Head of Invesco ETFs at Invesco Ltd., said at the 2018 Morningstar Investment Conference.
“Factor diversification can really matter, especailly for long-term investors,” Draper added.
For example, the Invesco Dynamic Market ETF (NYSEArca: PWC) was the first quantitatively constructed “intelligent” ETF launched in 2003. PWC tracks companies with superior risk-return profiles based on fundamental growth, stock valuation, investment timeliness and risk factors. Over the past 15-years, PWC has shown an average annualized return of 10.0%, compared to the S&P 500’s 9.7%.