Investors using factors to optimize risk, position for post-pandemic recovery; Adoption of dynamic factor strategies set to accelerate |


ATLANTA, September 27, 2021 / PRNewswire / – Invesco Ltd., one of the world’s leading asset management companies, today released its sixth Global Factor Investing Study. The study is based on interviews with 241 factor investors managing more than $ 31 trillion in assets.

This year’s study found that factor allowances continued to increase, with 43% of respondents increasing allowances in the past year and 35% predicting an increase the following year. Only 8% of respondents indicated that they plan to reduce factor allocations in the next 12 months.

The increased allocations came mainly from new money (38% of all respondents) followed closely by underlying assets (37%). Among North American respondents, the underlying asset was a more important source of funding for the new factor allocations at 41% versus 31% from new money.

Research has also indicated continued momentum around factor exchange traded funds (ETFs) as an important tool for implementing factor strategies among retail and institutional investors. ETFs can serve as the cornerstone of a portfolio completion strategy, tactic or tool, which is why institutional use of factor ETFs is accelerating particularly rapidly. 46% predict an increase in ETF use over the next three years.

“Factor-based approaches are increasingly adopted by clients, providing investors with opportunities that go beyond purely active and passive strategies,” said Mo Haghbin, Commercial Director and Chief Operating Officer, Invesco Investment Solutions. “Our conversations with clients and the study data show both that factor investing evolves steadily, with momentum set to accelerate, and demand for factor portfolio solutions and implementation through ETFs continuing to grow. to augment.

Post-pandemic recovery draws investors to value

The value factor received the largest increase in allocations over the past 12 months with 42% of respondents, followed by quality (31%), low volatility (27%) and momentum (26%). 48% agreed they were increasing their allocation to value in preparation for a post-pandemic recovery.

“Optimizing risk” is the most important reason for using factors, with 91% of respondents identifying this goal; “Increase yields” follows closely with 85% of respondents. A clear majority of investors believe their factor investing goals have been met or exceeded, although 26% of those surveyed said their goal of “increasing returns” had not been met.

Investors switch to dynamic strategies, adjust factors with the macro environment

Investors have adopted more complex factor strategies, with 72% now using multifactor strategies and 30% using dynamic factor strategies. The dynamic approach, which alternates allocations between different factors over time, is expected to accelerate, as 29% of investors say their approach has become more dynamic in the past two years and 41% expect to be more dynamic over the next two years.

Almost half (48%) make long-term strategic adjustments to exposures based on expected performance of factors at different points in the business cycle, but a significant minority (30%) make short-term tactical adjustments to leverage taken advantage of price opportunities.

There is a widespread belief that the applicability of factors may change due to macroeconomic / industrial trends, with 82% of respondents agreeing that the applicability of factors changes over time. Investors generally believe that the rise of technology (87%) and globalization (72%) have already had an impact on the applicability of various factors; while only 48% of respondents said climate change has already impacted the applicability of the factors, 86% agreed that it was likely to impact the applicability of the factors in the future .

“Opportunities and risks change during the market cycle, and asset allocation should too. It is clear that investors now think about their factor allocation more aggressively and view factor allocation decisions within the same framework used to make asset class allocation decisions, ”continued Mr. Haghbin. “The conversation between asset owners has shifted from ‘should I own factors? To “how should I own factors?” “”

Adoption of fixed income factor strategies continues to increase

Factor use in fixed income has increased significantly to 55% of respondents to this year’s study, up from 40% last year. More than half of respondents (52%) use both investment factors (such as value / quality) and macroeconomic factors (such as duration / inflation) in their factor strategies.

Almost half (45%) of investors indicated that the current low-yielding macroeconomic environment has made the use of factors within fixed income portfolios more attractive, providing an opportunity for additional sources of return and diversification. Controlling sources of risk (51%) and diversification (49%) were cited as “very important” reasons for choosing a factor approach rather than a passive approach. Respondents consider factor strategies to be generally comparable to active management to exploit sources of alpha, including risk premiums, behavioral logics and market structures, although the activity is still considered to have a certain advantage over risk management.

The potential benefits of ESG integration lead investors to a factor approach

In recent years, the focus has been on increasing sustainable investing and the study highlights the rapid increase in appetite for integrating ESG into a factor methodology. In 2021, 78% of respondents, all factor investors, indicated that they had integrated ESG into their portfolios. Improving investment performance is the main driver behind ESG adoption this year, cited by 75% of respondents, followed closely by customer / beneficiary demand at 72%.

Factor investing is considered more compatible with ESG compared to a market weighted approach, but behind a fundamental active approach. Despite this, respondents were more likely to say that ESG pushed them towards a factor approach, in part due to the ability to replicate quantitative methodology in different parts of a portfolio.

To view Invesco’s sixth annual 2021 Global Factor Investing Study in full, please click here.

Sample and methodology

Fieldwork for this study was carried out by NMG’s strategy consulting firm. Invesco has chosen to use a specialized independent firm to guarantee high quality objective results. Key elements of the methodology include:

  • A focus on key decision makers conducting interviews with experienced consultants and offering market insight
  • In-depth (usually one hour) face-to-face interviews using a structured questionnaire to ensure that both quantitative and qualitative analyzes have been collected
  • Results interpreted by NMG’s strategic team with relevant consulting experience in the global asset management industry

In 2021, the study’s sixth year, we interviewed 241 pension funds, insurers, sovereign investors, asset consultants, wealth managers and private banks around the world. Together, these investors are responsible for managing $ 31.1 trillion in the assets (at March 31, 2021).

In this year’s study, all respondents were “factor users”, defined as any respondent investing in a factor product across their portfolio and / or using factors to monitor exposures. We have deliberately targeted a mix of investor profiles across multiple markets, with a preference for larger and more experienced factor users. The breakdown of the 2021 interview sample by investor segment and geographic region is presented in the complete survey.

Institutional investors are defined as pension funds (both defined benefit and defined contribution), sovereign wealth funds, insurers, endowments and foundations.

Retail investors are defined as discretionary managers or model portfolio builders for asset pools of aggregate retail investors, including discretionary investment teams and fund selectors at private banks and fund providers. financial advice, as well as discretionary fund managers serving these intermediaries.

Invesco is not affiliated with NMG Consulting.

About Invesco

Invesco Ltd. is an independent global investment management firm dedicated to providing an investing experience that helps people get the most out of life. Our distinctive investment teams offer a full range of active, passive and alternative investment capabilities. With offices in more than 20 countries, Invesco has managed $ 1.5 trillion in assets on behalf of clients worldwide from June 30, 2021. For more information visit

Important information

All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This should not be interpreted as an offer to buy or sell financial instruments and should not be taken as the sole factor in an investment decision. As with all investments, there are inherent risks associated with it. This should not be taken as a recommendation to buy an investment product. This does not constitute a recommendation of an investment strategy for any particular investor. Investors should consult a financial professional before making any investment decision if they are unsure whether an investment is suitable for them. Please obtain and carefully review all financial documents before investing. Past performance does not represent future results. Diversification does not guarantee profit or eliminate the risk of loss. The opinions expressed are those of the author, are based on current market conditions and are subject to change without notice. These views may differ from those of other Invesco investment professionals. Invesco Advisers, Inc. is an investment advisor; it provides investment advisory services to individual and institutional clients and does not sell securities.

Contact person for media relations: Matthew Chisum 212.652.4368 [email protected]

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SOURCE Invesco Ltée.


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