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Equity factor faith rewarded: market turmoil highlights value of factors in managing risk

Invesco Global Factor Investing Study 2022

Theme 1

Factor allocations outperformed as volatile environment showcased strengths of factor investing
Figure 1.1 Global index returns (%)
  Value Momentum Quality Size Low volatility Yield / Carry
Relative performance (12 months to 31 March) -7.0 -5.4 1.0 -7.7 1.4 -0.3
Relative performance (3 months to 31 March) 2.2 -1.3 -3.1 -0.9 2.4 4.3
Relative performance (6 months to 30 June) 5.2 -3.9 -4.2 -2.1 8.2 9.9

Past performance is not a guarantee of future results. Source: https://www.msci.com/end-of-day-data-search. Indexes: ACWI, ACWI ENHANCED Value, ACWI MOMENTUM, ACWI QUALITY, ACWI SIZE TILT, ACWI MINIMUM VOLATILITY (USD), ACWI HIGH DIVIDEND YIELD. All in Gross USD terms. MSCI ACWI Index captures large and mid-cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries. MSCI ACWI Enhanced Value Index captures large and mid-cap representation across 23 DM countries and 25 EM countries exhibiting overall value style characteristics. MSCI ACWI Momentum Index includes large and mid-cap stocks across 23 DM and 24 EM countries that reflect the performance of an equity momentum strategy by emphasizing stocks with high price momentum. MSCI ACWI Quality Index includes large and mid-cap stocks across 23 DM and 24 EM countries that seek to capture the performance of quality growth stocks by identifying stocks with high quality scores based on three main fundamental variables: high return on equity (ROE), stable year-over-year earnings growth and low financial leverage. MSCI ACWI Size Tilt Index includes large and mid-cap stocks across 23 DM and 24 EM countries that seeks to reflect the performance of a low size strategy with relatively high investment capacity. MSCI ACWI Minimum Volatility Index aims to reflect the performance characteristics of a minimum variance strategy applied to large and mid-cap equities across 23 DM and 24 EM countries.  MSCI ACWI High Dividend Yield Index includes large and mid-cap stocks across 23 DM and 24 EM countries that seek to reflect the performance of equities in the parent index (excluding REITs) with higher dividend income and quality characteristics than average dividend yields that are both sustainable and persistent. An investment cannot be made directly into an index. 

In terms of outcomes, the dominant contributor has been which factors you’re exposed to.

Retail investor, EMEA
Allocations to factor investing continue to rise, with drivers of a factor approach expanding as investors become more experienced
Figure 1.2 Change in factor allocations (to/from March 2022), % citations

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    Invesco Global Factor Investing Study 2022

    By Invesco

    Understand the drivers of factor investing, investor experiences, and methods of implementation. Read the PDF now.

Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. An investment cannot be made directly into an index. 

Important information

  • Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.