Aside from education, the more widespread adoption of factor investing can be attributed to firms having greater internal capabilities to implement the strategy. Furthermore, respondents noted that the availability of a larger number of factor products available on the market has led to more capital allocation to factor strategies.
“Invesco has a 30 year history in factor investing in the U.S., with the factors most used by investors in North America, including Value, Size, Low Volatility and Momentum,” continues de Martel, “The feedback from the Global Factor Investing Study offers Invesco an understanding the investor factor experience provides us with a foundation to create products and portfolios that align with their future intentions.”
Invesco conducted the survey through face-to-face interviews with respondents in Q1 and Q2 2018. The full study seeks to capture the depth, color and context of the factor rationale of global investors.
The fieldwork for the study was conducted by NMG Consulting’s strategy consulting practice. Key components of the methodology included the following:
- A focus on the key decision makers within institutional investors, asset consultants, and private banks, conducting interviews using experienced consultants and offering market insights
- In-depth (typically one hour) face-to-face interviews using a structured questionnaire to ensure quantitative as well as qualitative analytics were collected
- Analysis capturing investment preferences as well as actual investment allocations with a bias toward actual allocations over stated preferences
- Results interpreted by NMG’s strategy team with relevant consulting experience in the global asset management sector
As for future trends in factor investing, the growth-fueled momentum factor of the decade-long bull run may appear to be coming out favor, particularly during the October sell-offs. This could portend to value returning to the forefront, but according to de Martel, value has always been at the top of the list or close to it in the last few years.
“For the past three years Invesco has conducted a Global Factor Study, value remained either the #1 or #2 factor used,” said de Martel. “We found that investors tend to see factor investing as a strategic decision, using on average between 2 and 4 strategies. From this standpoint, there is an expectation that a factor allocation, like value, may underperform or outperform through time but will remain a broad factor allocation. In the most current survey, value represented 19% of North American factor investors total portfolio on average. Based on these results, our expectation is that allocations to Value are likely to have remained generally stable after October.”
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