Invesco Global Systematic Investing Study 2024
Welcome to Invesco’s Global Systematic Investing Study 2024
This year’s study continues to provide valuable insights into the rapidly evolving landscape of systematic investing, chronicling the latest innovations and how practitioners globally are leveraging advanced quantitative techniques across asset classes. Based on interviews with systematic investors, this research collects the opinions of senior decision-makers responsible for managing $22.3 trillion in assets (as of 31 March 2024).
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2024 Invesco Global Systematic Investing Study
Invesco is a leading provider of systematic investment capabilities, with experience that dates back four decades. As part of our ongoing client engagement, we conduct the Invesco Global Systematic Investing Study, where we take the pulse of global investors to better understand how leading institutions are leveraging systematic strategies and harnessing emerging technologies to capture risk premia and generate portfolio alpha. Our survey findings showed three key trends.
Trend #1: Systematic strategies as a diversifier in highly concentrated equity markets
Global equity markets have become much more concentrated over the last few years. This is leading investors to diversify their portfolios, and so far, we’ve seen early movers into systematic strategies rewarded. One emerging theme we’re seeing is investors taking traditional factor exposure and leveraging it in dynamic asset allocation models. Over 80% of global investors surveyed find this approach valuable. This is particularly important as investors continue to be evaluated on shorter time horizons. Asia Pacific investors have been head of their global peers with respect to this trend, as 90%+ of regional investors surveyed are adopting systematic equity exposure in their asset allocation.
Trend #2: Beyond traditional asset classes: Growth of systematic investing in alternatives
Investors are and deploying systematic approaches in alternative asset classes such as commodities and real estate. For example, in commodities we see interest in systematic strategies which can diversify a portfolio of stocks and bonds, and provide protection in an environment where there could be sustained inflation risk. In other alternative asset classes such as real estate, systematic strategies can be used to replicate exposure traditionally reserved for illiquid strategies. This allows investors to quickly adapt portfolios to changing macroeconomic conditions.
Trend #3: Emergence of AI in the systematic investing process
Investors are increasing use of AI and other advanced data analysis techniques, which are becoming increasingly an important source of investment decision. Asia Pacific investors are in front of this global trend, with investors surveyed three times as likely to extensively use AI in their investment process, as compared to other regions. These investors generally believe AI will supplant traditional analysis methods at a much higher pace than other regions. We strongly believe the “AI trend” will continue, specifically in Asia.
I highly encourage you to read the full Invesco Global Systematic Investing Survey to have a deep dive into the themes that I covered today, and other themes that may be helpful to you. Please talk to us if you would like further information on this growing space.
3 major trends of the study
Chris Hamilton uncovers three major trends from 2024 Global Systematic Investing Study that are relevant to Asia Pacific Investors. Watch the video to learn more.
Highlights from the study’s four key themes
Theme 1
The first theme highlights how investors are increasingly embracing systematic strategies to build resilient multi-asset portfolios. In response to a rapidly changing investment landscape characterized by market volatility and shifting asset correlations, investors are moving towards more adaptive, data-driven approaches capable of navigating complex market dynamics.
What systematic techniques do you think are effective for adding value during portfolio construction?
Theme 2
Theme two explores how multi-factor strategies have become the norm as investors seek to capture a broader spectrum of risk and return opportunities in a complex macro-environment. The dominance of mega-cap tech stocks is reshaping market dynamics, prompting investors to recalibrate their strategies and adopt more diversified approaches to factor allocation.
What investment factors do you explicitly seek / have exposure to within your portfolio (or client portfolios)?
Theme 3
Theme three chronicles the rising adoption of artificial intelligence (AI) in investment processes. Over half of investors now incorporate AI in some form, with applications ranging from pattern recognition to portfolio optimization. While investors see significant potential in AI, challenges around interpretability and data quality persist.
Do you incorporate AI into your investment process?
Theme 4
In theme four, we find the ESG landscape is undergoing a transformation as investors increasingly demand highly customized solutions to meet their unique sustainability objectives. Systematic approaches have emerged as the vanguard of this evolution, offering the flexibility and scalability required to create highly tailored ESG strategies.
What are the advantages of a systematic approach to applying ESG?
Risk warnings
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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.
Factor investing (as known as smart beta or active quant) is an investment strategy in which securities are chosen based on certain characteristics and attributes that may explain differences in returns. Factor investing represents an alternative and selection index-based methodology that seeks to outperform a benchmark or reduce portfolio risk, both in active or passive vehicles. There can be no assurance that performance will be enhanced or risk will be reduced for strategies that seek to provide exposure to certain factors. Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. Factor investing may underperform cap-weighted benchmarks and increase portfolio risk. There is no assurance that the investment strategies discussed in this material will achieve their investment objectives.
Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.
The use of environmental, social and governance factors to exclude certain investments for non-financial reasons may limit market opportunities available to funds not using these criteria. Further, information used to evaluate environmental, social and governance factors may not be readily available, complete or accurate, which could negatively impact the ability to apply environmental, social and governance standards.
There are risks involved with investing in ETFs, including possible loss of money. Index-based ETFs are not actively managed. Actively managed ETFs do not necessarily seek to replicate the performance of a specified index. Both index-based and actively managed ETFs are subject to risks similar to stocks, including those related to short selling and margin maintenance.
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