When it comes to factor investing, the majority want value and they want it now, according to the 2019 Invesco Global Factor Investing Study. While the argument is whether value can continue being the primary factor of choice over growth remains to be seen, but for now, value reigns as the king of factors.
“The movement of factor investing toward the mainstream continues at pace,” said Georg Elsässer, senior portfolio manager, quantitative strategies at Invesco. “Early adopters want to do more with their factor allocations, including active and customized approaches and expanding to fixed income. Existing factor investors have been increasing allocations with over half of the respondents in the study intending to increase allocations over the next three years, this pattern of adoption is likely to continue.”
Overall, it’s not just a win for value investing, but a win for all factors. Vincent de Martel, Senior Invesco Investment Solutions Strategist, told ETF Trends that factor investors who interviewed for the study are continuing to utilize factor strategies to a greater extent.
“This materializes in the expansion of the opportunity set in equities and increasing demand for fixed income factor solutions,” de Martel said. “In equities, we’re seeing strong buying activity in factors such as low volatility as investors seek to maintain participation to the equity market with lower downside risk.”
An aging bull market is seeing the value factor drink from the fountain of youth lately. While investors are hopping off the growth and momentum train, the risk-off sentiment is causing them to shift back to value where opportunities are rife for funds like the Deep Value ETF (NYSEArca: DVP).
DVP seeks to provide investment results that, before fees and expenses, correspond to the total return performance of the Deep Value Index. The Index is comprised of 20 undervalued dividend paying stocks within the S&P 500 Index with solid balance sheets, earnings and strong free cash flow. The companies within the Index are weighted based on a rules-based assessment of their valuations so that stocks that are most attractively valued receive a higher weight.
- The Deep Value Index is constructed using an objective, rules-based methodology that begins with an initial universe that mirrors the companies listed on the S&P 500 Index. The universe of companies is then narrowed to include only companies that have positive earnings and returns on invested capital, generate free cash flow, and currently pay a dividend.
- The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. You cannot invest directly in an index.
- Free cash flow represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base.
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