Using factor investing to navigate choppy, low-return markets
Describing factors and how to implement them in portfolio construction
While the performance of stock markets has been strong since the financial crisis, a more sophisticated approach is now required. The volatility of financial markets in the last 12 months highlights the current challenges. Risks of lower economic growth are curbing the medium-term return potential of equities while bouts of volatility threaten to erode the value of the portfolio.
Investors are increasingly looking for a new approach to equity investing to make the most of available risk premia and to minimise the impact of market volatility on the value of a portfolio. Smart Beta solutions can answer these needs, as they provide improved diversification compared with market capitalisation-weighted indices by addressing many of their limitations. These products aim to help investors reduce volatility and access potentially better returns as well as mitigate losses in bear markets.
After defining Factor Investing, Amundi takes a look at the different strategies investors can implement with this Smart Beta approach.
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