The Invesco Global Factor Investing Study is a uniquely large and comprehensive examination of global factor investing – a form of investing in which securities are chosen based on attributes (commonly termed ‘factors’) which have tended to offer favorable risk and return patterns over time.
We explore the state of factor investing with four themes and from a series of deeper conversations with a few extensive factor users, raise possible future trends within the factor investing space:
Click below for an in depth look into each theme.
Equity factor faith rewarded: market turmoil highlights value of factors in managing risk
In our first theme, we focus on the performance of factors during recent market volatility and the impact that this had on investor sentiment. We find for many the volatile environment has demonstrated the strengths of a factor approach, with factor exposures now seen as fundamental in understanding the relative performance of portfolios.
ESG performance challenges drive interest in applying a factor approach to ESG
In theme 2, we look at the intersection of factor investing and Environmental, Social and Governance (ESG). Factors are now seen as an important tool for maintaining performance when adopting ESG, for example by controlling for unwanted bias resulting from ESG integration.
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.
Accelerating rate of change in markets highlights the benefits of tactical tilting to a long-term, diversified multi-factor approach
In our fourth theme, we explore approaches to implementation and find four-fifths of factor investors now adjust factor weights through time. This is driven by the varying performance of different factors over the economic cycle and desire to balance out exposures across the portfolio. We note many investors are using factor products both tactically and strategically and this differentiation plays an important role in product selection.
10 in-depth interviews revealed thoughts about where Factor Investing could be heading in the future
10 in-depth interviews were conducted with highly experienced factor users to think about the future of factor investing. Click to read thoughts on performance and volatility, factor investing moving into other asset classes, and the increasing use of technology.
Invesco Global Factor Investing Study 2022
Understand the drivers of factor investing, investor experiences, and methods of implementation. Read the PDF now.
The fieldwork for this study was conducted by NMG Consulting’s strategy consulting practice. Invesco chose to engage a specialist independent firm to ensure high-quality objective results. Key components of the methodology include:
In 2022, the seventh year of the study, we conducted interviews with 151 different pension funds, insurers, sovereign investors, asset consultants, wealth managers and private banks globally. Together these investors are responsible for managing $25.4 trillion in assets (as of 31 March 2022).
This year, the core study was supplemented with 10 additional in-depth interviews with highly experienced factor users to better understand how factor investing has evolved and is expected to continue to develop.
In this year’s study, all respondents were ‘factor users’, defined as any respondent investing in a factor product across their entire portfolio and/or using factors to monitor exposures. We deliberately targeted a mix of investor profiles across multiple markets, with a preference for larger and more experienced factor users.
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 constructors for pools of aggregated retail investor assets, including discretionary investment teams and fund selectors at private banks and financial advice providers, as well as discretionary fund managers serving those intermediaries.
Invesco is not affiliated with NMG Consulting.
1Defined as a financial market where prices are currently rising or expected to rise
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.
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.
