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Accelerating rate of change in markets highlights the benefits of tactical tilting to a long-term, diversified multi-factor approach

26 September 2022
Invesco
Invesco Global Factor Investing Study 2022

Theme 4

80% of factor investors now adjust factor weights through time, driven by the varying performance of different factors over the economic cycle and a need to balance out exposures across the portfolio
Figure 1.1 Adjust factor weights through time, % citations

Do you adjust your factor weights through time? Sample size: 143

The time frame used to assess performance is falling with single factor tactical allocations assessed over the short-term, but multi-factor strategic allocations still assessed over the long-term
Figure 1.2 Time-frame used to assess performance of factor strategies, % citations

What time frame do you use to analyse / assess the performance of factor strategies? Sample size: 2019 = 238, 2022 = 147

For multifactor ETF’s we would be very much looking at how far it tracks away or close to the overall benchmark. If we are looking for pure exposure to a single factor, we would look at how the product tracks against that factor’s index.

Retail investor, North America
Use-case is driving selection decisions for factor products; factor purity is key for tactical allocations while performance relative to benchmarks is important for strategic allocations
Figure 1.3 ETFs used strategically or tactically, % citations

Do you use factor ETFs strategically or tactically? Sample size: 73

Read our key themes

Theme 3 End of the fixed income bull market sees investors looking to factors for new sources of return potential

In our third theme, we examine how and where factor investing is being used within fixed income. The application of factors within fixed income is nearly universal, and we find the potential end of the fixed income bull market has led to accelerating levels of demand for a factor approach. In particular, factors are seen helping to manage volatility and as an aid in delivering more diversified sources of return potential.

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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.

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