Style Research hosted a Factor Investing Forum in New York City on December 7. This is the first in a series of planned factor investing events which will continue in the US and in Europe in 2017. These sessions bring together expert practitioners to share how they are approaching and implementing factor investing, connecting an important industry theme to real-world practice.

We were thrilled to welcome attendees representing the investment community across fund buyers, fund constructors and sellers, and consultants. We are especially grateful to our guest speakers whose thought-provoking and practical presentations kept us on the edge of our seats.

Practical Insights into Factor Investing

dsc_5987Following a few words of welcome by Dave Merrill, executive managing director of Style Research, Peter Grant, Principal of Mercer Investments, got the morning started. Peter shared how Mercer is advising plans on factor investing in equity strategies. Peter discussed how understanding sources of return requires a thorough understanding of factor exposures. This includes assessment over multiple time periods, as well as looking at a wide range of factors. Peter also presented an example of research showing the relevance of key styles within Value, Momentum, Low Beta, Profitability, and Size.

dsc_5989Bernie Nelson, President, North America, of Style Research, kicked off with a brief overview of the evolution of factor and style investing and how a standard framework could be applied to all types of active, passive, and smart beta products. He presented a consistent approach to differentiate seemingly similar products, comparing examples of Low Vol funds – PowerShares S&P 500 Low Volatility Portfolio and iShares Edge MSCI Min Vol USA – against a custom peer group. He demonstrated significant distinctions between these two funds across sectors, style factors, and overall portfolio risk.

dsc_5995Tim Taylor, Senior Investment Officer with the Florida State Board of Administration, rounded out the presentations with his views on how his internal asset management team, whose involvement has been gradually increasing over the years, is implementing factor investing in this $78bn state pension plan. Tim discussed their factor considerations and decision-making rationale, as well as their strategy to mitigate risk by weighing factor risks against other investment criteria.

Please contact us to learn more about style and factor analytics from Style Analytics.

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