You’ve probably heard about factor investing for a while, but recent market volatility is prompting many advisors to consider how to incorporate a factor investing viewpoint into their portfolio construction process.
In the upcoming webcast, Factor Investing: An Implementation Toolkit for Today’s Market, Jeffrey Schwarte, Portfolio Manager, Principal Global Equities; Todd Jablonski, Chief Investment Officer, Principal Global Asset Allocation; and Matt Raynor, Managing Director, Strategic Client Group, Principal Global Investors, will share two implementation strategies designed to help financial advisors enhance and diversify a client’s investment portfolio.
For example, the Principal U.S. Mega-Cap Multi-Factor Index ETF (NasdaqGM: USMC) is comprised of companies with the largest market capitalization taken from the Nasdaq U.S. 500 Large Cap Index and screened based on a quantitative model. USMC is a multi-factor fund, an increasingly popular strategy within the broader smart beta universe.
USMC’s underlying index utilizes a modified equal-dollar weighting methodology where securities in the top 10% of aggregate market capitalization are weighted by market cap, but securities of the remaining companies are equally weighted and, in certain cases, weights are adjusted to emphasize stocks with lower historical volatility and de-emphasize stocks with higher historical volatility.
The ETF can potentially provide investors a systematic tilt toward lower historical volatility as a way to offer more stability and better downside protection, along with a highly focused, yet risk-aware, exposure to mega-cap in an attempt to help investors generate better risk-adjusted returns over the long haul.
Principal Global Investors also offers an expanded suite of factor-based strategies, including the Principal U.S. Large-Cap Multi-Factor Core Index ETF (PLC), Principal U.S. Small-Mid Cap Multi-Factor Core Index ETF (PSM), Principal U.S. Small-Cap Multi-Factor Index ETF (PSC), and Principal International Multi-Factor Core Index ETF (PDEV).
Financial advisors who are interested in learning more about factor investing can register for the Wednesday, May 20 webcast here.