UBS: Does factor investing still work?

Factor ETFs have lately experienced a growth in investors’ interest with the five-year cumulative annual growth rate in invested assets of more than 30%.

07.11.2016 | 10:05 Uhr


  • Factor investing has emerged as an important investment approach with assets in factor ETFsnow reaching USD 430 billion globally.
  • Factors have historically had higher returns thanbroad benchmarks. For example, since the year 2000, the eurozone Low Volatility factor has outperformed the standard market cap index by 5% per annum, whilst exhibiting significantly lower volatility.
  • Relative performance of different factors vis-à-vis the market has a time-varying correlation structure which can lead to diversification benefits. Multifactor portfolios typically offer more attractive risk return properties compared to individual factors.
  • From a valuation perspective, factor indicescurrently have price-to-earnings ratios close to that of the broad market and are in fact lower than their historical highs.

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