Factor investing has long been a cornerstone of systematic portfolio construction, particularly within the ETF ecosystem. In European UCITS ETFs, its relevance has grown significantly: factor ETF assets have reached over USD 80 billion and have now surpassed those in sector ETFs, signalling a structural change in investor behaviour. Still, they represent only about 5% of the overall UCITS market . A key driver behind this trend is the rise of equal-weighted investment strategies, which have become a simple and efficient tool for investors to navigate current market challenges, now accounting for roughly a quarter of all factor allocations.
The reasons behind this rise are straightforward: unlike sector investing, factor investing is not a zero-sum game—blending factors can enhance rather than dilute returns.
The rise of equal weighting as a factor is notable because it does not fit neatly into a single factor box; rather, it combines a low‑size tilt, less growth exposure, and an anti‑momentum effect driven by frequent rebalancing. We view equal weight as part of a family of “next‑generation” factors—approaches designed to remain relevant in a changing market by blending established factor signals with newer insights and market dynamics that have become more salient recently. In the following section, we investigate three additional hybrid factor signals that have gained increasing attention from investors in light of a changing investment landscape.
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