Equity returns straight from the «sources»

Similar documents
Q&A Launch of the CSIF (CH) SPI Multi Premia Index Blue

Lazard Insights. Distilling the Risks of Smart Beta. Summary. What Is Smart Beta? Paul Moghtader, CFA, Managing Director, Portfolio Manager/Analyst

As Perfect as the Original: Credit Suisse Index Funds

How smart beta indexes can meet different objectives

Advisor Briefing Why Alternatives?

Factor Investing. Fundamentals for Investors. Not FDIC Insured May Lose Value No Bank Guarantee

Factor Investing & Smart Beta

The Merits and Methods of Multi-Factor Investing

Factor Performance in Emerging Markets

Smart Beta and Factor Investing Global Trends for Pension Investors

Research Implementation considerations for factor investing

FACTOR INVESTING: Targeting your investment needs. Seek to enhance returns Manage risk Focused outcomes

Smart Beta Dashboard. Thoughts at a Glance. January By the SPDR Americas Research Team

The benefits of core-satellite investing

Factor-Based Investing

B. Arbitrage Arguments support CAPM.

Discover the power. of ETFs. Not FDIC Insured May May Lose Lose Value Value No No Bank Bank Guarantee

STRATEGY OVERVIEW. Long/Short Equity. Related Funds: 361 Domestic Long/Short Equity Fund (ADMZX) 361 Global Long/Short Equity Fund (AGAZX)

Ted Stover, Managing Director, Research and Analytics December FactOR Fiction?

UMA Model Portfolios Professional Advice for Your Unified Managed Account

Dynamic Smart Beta Investing Relative Risk Control and Tactical Bets, Making the Most of Smart Betas

ETF Research: Understanding Smart Beta KNOW Characteristics: Finding the Right Factors Research compiled by Michael Venuto, CIO

+ = Smart Beta 2.0 Bringing clarity to equity smart beta. Drawbacks of Market Cap Indices. A Lesson from History

Discover the power. of ETFs. Not FDIC Insured May May Lose Lose Value Value No No Bank Bank Guarantee

Quantitative Management vs. Traditional Management

Ideal Global Absolute Return Strategies Fund. Engineered to absorb shocks

Smart Beta Dashboard. Thoughts at a Glance. March By the SPDR Americas Research Team

MULTI-FACTOR INDEXES MADE SIMPLE

Alternative Premia, Alternative Price

STRATEGY OVERVIEW. Opportunistic Growth. Related Funds: 361 U.S. Small Cap Equity Fund (ASFZX)

PROFESSIONALLY MANAGED INVESTMENT SOLUTIONS THROUGH EXCHANGE TRADED FUNDS

BNP PARIBAS CATALYST SYSTEMATIC ALPHA INDEX

NIFTY Multi-Factor Indices. Multi-factor index strategies provide diversified factor-exposure with varied risk-return profile

BUILDING EQUITY PORTFOLIOS WITH STYLE JULY 2014

Smart Beta and the Evolution of Factor-Based Investing

BUILDING INVESTMENT PORTFOLIOS WITH AN INNOVATIVE APPROACH

Aiming to deliver attractive absolute returns with style

A Performance Analysis of Risk Parity

Why Use Smart Beta in DC?

Pursuing a Better Investment Experience

Diversified Growth Fund

Factoring in Behavior

Solving for Fixed Income

CHAPTER 17 INVESTMENT MANAGEMENT. by Alistair Byrne, PhD, CFA

Amajority of institutional

Risk-Efficient Investment Portfolios from AlphaSimplex Group. Strategies that put risk management first

NATIONWIDE ASSET ALLOCATION INVESTMENT PROCESS

Discussion of The Promises and Pitfalls of Factor Timing. Josephine Smith, PhD, Director, Factor-Based Strategies Group at BlackRock

Smart Beta and the Evolution of Factor-Based Investing

Investment Advisory Whitepaper

The Triumph of Mediocrity: A Case Study of Naïve Beta Edward Qian Nicholas Alonso Mark Barnes

Seeking higher returns or lower risk through ETFs

LC DIVERSIFIED STRATEGY OVERVIEW

Benchmarking & the Road to Unconstrained

Motif Capital Horizon Models: A robust asset allocation framework

Flash Note Equity investment strategies

INVESTING 4 STEPS TO AN EFFECTIVE PORTFOLIO

Schroder ISF Global Conservative Convertible Bond. Schroder ISF Asian Convertible Bond

Pursuing a Better Investment Experience

MOMENTUM INVESTING: SIMPLE, BUT NOT EASY

Shaun Levitan 7 June 2017

Structured Portfolio Enhancements

IOOF Investments Reproduced with permission from Financial Planning magazine November 2016

3Q18. The cost of not hedging foreign currency. July Executive summary

Factor Investing: Smart Beta Pursuing Alpha TM

Factor Investing: 2018 Landscape

Tactical Income ETF. Investor Presentation N ORTHC OAST I NVESTMENT A DVISORY T EAM NORTHCOASTAM. COM

Smart Beta: Index Investing, Evolved

Active and passive investing What you need to know

S T H EIG E H H SCALING THE HEIGHTS I WITH EXCHANGE TRADED FUNDS T G LIN A SC

Tax-Managed SMAs: Better Than ETFs?

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

Investment Policy Statement

INSIGHTS. The Factor Landscape. August rocaton.com. 2017, Rocaton Investment Advisors, LLC

Smart 401k Investing. Table of Contents. Investing made simple. Brentwood 401(k) Retirement Plan Program

ETF strategies INVESTOR EDUCATION

RISK PARITY SOLUTION BRIEF

Nasdaq Chaikin Power US Small Cap Index

INVESTMENT COMMITTEE ANNUAL REPORT For the Year Ended March 31, 2016

FROM BEHAVIORAL BIAS TO RATIONAL INVESTING

The Benefits of Dynamic Factor Weights

Getting Smart About Beta

Integrated Wealth Management. Portfolio management i financial planning i tax services

INVESTING IN PRIVATE GROWTH COMPANIES 2014

Multi-Asset Evolution in the 21 st Century

HOW TO HARNESS VOLATILITY TO UNLOCK ALPHA

Alternative Index Strategies Compared: Fact and Fiction

Smart Beta. or Smart Alpha?

QUARTERLY MARKET OUTLOOK THIRD QUARTER CLS-7/11/2017

Putting the smart back into beta

Momentum Growth Optimiser

Understanding the Volatility Risk Premium

Video: GIC Wealth Management Perspectives

PROFESSIONALLY MANAGED INVESTMENT SOLUTIONS THROUGH EXCHANGE TRADED FUNDS

Sector Investing: Essential Building Blocks for Portfolio Construction

Agenda. Overview. Strategy Q&A

IRISH LIFE S MULTI MANAGER OF TARGET RETURN FUNDS:

Smart Beta Dashboard. Thoughts at a Glance. June By the SPDR Americas Research Team

Comprehensive Factor Indexes

Global Equity Style Premia

Transcription:

Equity returns straight from the «sources» Investing where it pays off with Finreon Equity Multi Premia. Diversification across multiple sources of return.

Where do returns come from? Factors explain stock returns The traditional passive investor invests statically in a single source of return: the market. However, a number of drivers of return, so-called factors, exist. For example, the Nobel Prize winner Eugene Fama has shown in one of his most important papers that the shares of small companies (size factor) or low priced stocks (value factor) systematically beat the market and thereby help to better explain return differences between stocks with different characteristics. However, in the traditional passive approach these sources of return are not considered the investor benefits only unconsciously and unsystematically of a fraction of the available drivers of stock returns. Factors exhibit a positive premium In the past 30 years, academic research has identified additional factors that can achieve significant excess returns over the long-term. While some of these sources of return could be explained by risk exposures (so-called risk premia), they are often rooted in irrational behavior of investors (socalled anomalies). Nowadays, the generally accepted sources of return, besides the classic market-factor (1), include the factors size (2), value (3), momentum (4), residual momentum (5), reversal (6), low risk (7) and quality (8). Sources of return factor 8 Quality (profitable stocks) Expected return factor 7 Low Risk (low risk stocks) factor 1 Market (general equity risk) factor 6 Reversal (stocks with trend reversal) factor 2 Size (small stocks) factor 5 Residual Momentum (stock specific trends) factor 4 Momentum (systematic trends) factor 3 Value (cheap stocks)

The sources of return reach their full potential only in combination Cyclical fluctuations Each of these sources of return drives the portfolio return in the long-term. However, the factor premia vary over time, and might suffer from long-lasting and distinct phases of underperformance. Investing in a single factor premium thus requires a long-term investment horizon and is therefore not a suitable option for most investors. High diversification potential Thanks to the low mutual correlations among the single factor premia this problem can largely be resolved: Through a combination of the different sources of return, the prolonged underperformance periods of the single factors can be avoided. By diversifying across all factor premia the outperformance becomes robust and thus better investable. Combination of additional sources of return in the global equity market (accumulated excess return compared to the S&P Global 1200, illustrative) Different sources of return Combination 180 180 160 160 140 140 120 120 100 100 80 80 2002 2004 2006 2008 2010 2012 2014 2016 2002 2004 2006 2008 2010 2012 2014 2016 Size Momentum Reversal Quality Value Residual Momentum Low Risk Multi Premia Indexed cumulative outperformance of the seven long-only factors (left graph) and the combined Multi Premia Strategy (right graph) compared to the S&P Global 1200. Time frame January 2002 July 2016 (backtesting)

The solution: Finreon Equity Multi Premia Optimal combination of factor premia Finreon Equity Multi Premia combines all major sources of stock market returns in a systematic approach to achieve a robust solution. In addition to the stock market premium, seven factor premia can be harvested systematically. The Finreon Equity Multi Premia solution thus extends the traditional passive investment approach in an ideal manner. Intelligent substitute for a core investment The optimal diversification within the Finreon Equity Multi Premia solution ensures a robust outperformance and a low tracking error. The solution is implemented long-only using physical equity investments. The passive investor receives a smart substitute for a core investment. Embedding the Finreon Equity Multi Premia in the strategic asset allocation (illustrative) Status quo: 1 return source (Market) New: 8 return sources (Market + Size + Value + Momentum + Residual Momentum + Reversal + Low Risk + Quality) Bonds Other Equities Liquid Assets Real Estate

The Equity Multi Premia investment solutions The Finreon Equity Multi Premia approach is available in a market capitalization weighted version (classic) characterized by a low tracking error and an optimized return potential, in an alternatively weighted version (extra) which exhibits a medium tracking error and maximizes return potential, and as a minimum variance weighted version with a reduced risk (defensive). Equities Switzerland (in cooperation with the Swiss stock exchange SIX) SPI Multi Premia Investment universe contains 60 of the largest Swiss stocks. SPI Single Premia: 7 factor indices Investment universe contains 30 of the largest Swiss stocks. Equities World World Equity Multi Premia Investment universe contains 1000 of the largest stocks worldwide. World Equity Multi Premia Defensive Investment universe contains 1000 of the largest stocks worldwide. Equities Europe European Equity Multi Premia Investment universe contains 350 of the largest European stocks. Equities US US Equity Multi Premia Investment universe contains 500 of the largest US stocks.

Finreon a spin-off from the University of St.Gallen (HSG) Finreon, founded in 2009 as a spin-off from the University of St.Gallen (HSG), has established itself as a competent partner for innovative investment concepts in the field of asset management and investment consulting. In its solutions, the company combines many years of investment experience with the latest findings in financial research. CEO Dr. Ralf Seiz Lecturer at the University of St.Gallen (HSG) Contact Finreon Ltd. Oberer Graben 3 CH-9000 St. Gallen +41 71 230 08 06 info@finreon.ch www.finreon.ch This document and any information contained herein are intended for qualified investors and are confidential. They are meant for informative purpose only. This document constitutes neither financial, legal, tax or other advice nor an offer for any transaction. No investment decision should be made solely based on this information. Investments in any of the described investment instruments should only be made after carefully studying the corresponding prospectus and fund contract as well as the annual or half-yearly report including all the legal information therein. You should obtain advice from a qualified expert before making any investment decision. Although Finreon Ltd. intends to keep the content of this document correct and complete, no warranty is given regarding correctness, completeness or this document being upto-date. No liability is accepted for any damages whatsoever arising from action taken on the basis of information contained within this document. The name as well as the product and methodology Multi Premia are intellectual property of Finreon Ltd. and protected. Any reproduction or recirculation is prohibited. Past performance is not an indicator for future performance. Finreon: 05/2017