Multi-factor strategies are becoming an increasingly important part of the smart beta landscape, particularly in volatile markets when investors are looking to reduce volatility and hone in on quality stocks.
The Oppenheimer Russell 1000 Dynamic Multifactor ETF (Cboe: OMFL), which recently celebrated its first anniversary, provides efficient access to the low volatility, momentum, quality, size and value factors.
Investors may combine the various factors to gain an easy-to-use and quick way to access a diversified market position. This combined factor or multi-factor, smart beta approach may be a good core position for any equity portfolio. OMFL holds nearly 230 stocks and targets the Russell 1000 OFI Dynamic Multifactor Index. The recent market environment has been conducive to low volatility and quality exposure.
“This shift in factor emphasis resulted in strong relative performance for the Russell 1000 OFI Dynamic Multifactor Index for the year ended November 8, 2018,” said FTSE Russell in a recent note. “Notably, the Russell 1000 OFI Dynamic Multifactor Index rose 15.7% in this period relative to a 10.1% rise for the Russell 1000 Index.”
A Quality Investing Idea
Investors looking to focus on the quality factor can do so with the Oppenheimer Russell 1000 Quality Factor ETF (OQAL). OQAL selects higher quality companies in the hopes that they perform better than lower-quality companies. The fund screens for an equally-weighted composite of return on assets, change in asset turnover, accruals, and leverage.