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.