The asset management market is currently awash with an enormous number of products, making it difficult to cut through the confusion of the various offerings ranging from passive, enhanced index, smart beta, smart alpha, single factor, multi factor right through to traditional active and hedge funds. Against this landscape, asset owners, managers and consultants are under pressure to provide increased transparency as end-investors want to understand where potential bias, underperformance or unforeseen risk may lie.
The rise of factor investing
As a result, factor investing, the use of targeted quantifiable factors to explain differences in stock returns, is on the rise. Over the past 20 years we have seen an increase in the volume of academic research on how factors can be used to explain performance, which in turn has created a range of products using descriptions based around factor terminology. This has coincided with a dramatic market evolution post-financial crisis, with asset owners and investors seeking to obtain a much better understanding of how their money is being invested. Research has shown that allocation in factor strategies has now surpassed $1.9 trillion; a trend which shows no signs of slowing down with experts predicting this to almost double, reaching $3.4 trillion by 2020.
The rise of factor investing as an industry trend has also resulted in the creation of a so-called “factor zoo”. An ever-growing field of providers are proposing a multitude of factors and different theories, making it extremely challenging to identify which factors are relevant. The market is crying out for clarity. In amongst this huge, complex industry, asset owners, consultants and asset managers need an independent view to confirm which factor tilts are in line with expectations, and to quickly identify unintended exposures.
Appropriate analytics, appropriate new name
Style Analytics helps investment professionals across the UK, Continental Europe, North America and Asia, analyze funds with a common factor analysis framework across markets, peer groups and portfolios. By simplifying this common framework into a clear, graphical interpretation, the analysis can be shared between various market players and easily understood by not only the fund manager, but also end-investors.
Managers seeking to differentiate their investment processes, and investors and selectors aiming to pinpoint portfolios with targeted factor biases can use the Style Analytics Style Skyline™ to gain a comprehensive and easy-to-understand view of factor exposures for individual portfolios, funds of funds and entire peer groups.
It is precisely this focus on in-depth analysis that has led to the recent rebrand from ‘Style Research’ to ‘Style Analytics’. We believe that the new name better reflects what we have been providing for the past 20 years – delivering tools that help institutional investors and investment managers analyze their strategies using factor methodology.
As well as wanting our name to more closely reflect what our products and services provide, we acknowledge that the term ‘research’, as defined under MiFID II regulation with its particular context in the investment industry, may be unnecessarily confusing. As a result, we consider the choice of the Style Analytics brand better articulates what we offer and for what we are known.
Independent, flexible standard
Style Analytics’ products and services are designed to help institutional investors and investment managers deepen their understanding of the true drivers of investment portfolios through clear style analysis, helping determine which factor exposures are impacting risk and performance.
We are very proud to deliver a standardised framework of factors, designed to help our clients compare a wide spectrum funds of many different types, on a fair and truly independent basis. Although our methodology for deriving the output is standardised, we also provide flexibility so our customers can decide for themselves which factors they believe are most relevant. Transparency at its most simplest, independent and flexible best.