As more investors look for ways to diversify away from potential risks associated with traditional market cap-weighted exposures, many are turning to factor-based strategies that follow strict rules-based indexing methodologies to enhance a portfolio and limit potential downside risks.
In the upcoming webcast, ActiveBeta®: Capturing Performance Drivers in Today’s Uncertain Market, Steve Sachs, Head of Capital Markets, ETFs, Goldman Sachs Asset Management; Osman Ali, Portfolio Manager, Quantitative Strategies, Goldman Sachs Asset Management; and Adam Grossman, Chief Investment Officer, Global Equity, RiverFront Investment Group, will talk about factor investing and focus on ActiveBeta strategies to help financial advisors diversify client portfolios.
The Goldman Sachs ActiveBeta® U.S. Large Cap Equity ETF (NYSEarca: GSLC) was one of the first ETFs introduced by Goldman Sachs. As a multi-factor ETF, part of GSLC’s objective is to provide investors with a broad basket of equities with the potential to top traditional benchmarks, such as the S&P 500, while removing the need to time individual investment factors. The smart beta ETF is also one of the least expensive smart beta ETFs investors can find at just nine basis points.
GSLC factors include value or how attractively a stock is price relative to fundamentals like book value and free cash flow; momentum or the current up or down trend in a companies stock; quality or profitability; and low volatility or the degree of fluctuation in a company’s share price over time. These are some of the factors frequently screened for under an actively managed portfolio.
Cap-weighted indices may expose investors to other fundamental risks as the weighting methodology would attach more weight toward indebted countries or companies. On the other hand, multi-factor benchmarks attempt to avoid such problems. Frequently used factors in multi-factor indexes include, value, growth, quality, and low volatility.
Financial advisors who are interested in learning more about factor-based investing can register for the Wednesday, May 13, webcast here.