Summary of Factors

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7 Overall

7 Importance

8 Innovation

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Recommendation

The 2008 financial crisis prompted institutional investors to re-examine the value of conventional portfolio construction based on diversification by asset class. Many have turned to factor-based investing as a way to decrease risk, raise returns and reach investment targets. These strategies incorporate variables that influence risk, such as inflation and company size. This 2016 survey from the Economist Intelligence Unit reveals how widely institutional investors are using factors, whether results are meeting expectations and what lingering doubts experts have about the approach. While the report is dense with raw survey results, getAbstract recommends it to executive money managers in private and public organizations.

In this summary, you will learn

  • What factor-based investing entails,
  • How widely factors are in use,
  • How investors employ factors to improve portfolio results,
  • How well factors perform and
  • What lingering doubts some investors have about using them.
 

About the Author

The Economist Intelligence Unit is an independent research and analysis organization.

 

Summary

Factor-based investing employs portfolio models that incorporate broad influences on asset value; these variables include “economic growth, inflation, volatility and company size.” The approach seeks to improve on portfolio construction methods that rely on asset class diversification. Factors can add accuracy and consistency to investment allocations, resulting in decreased risk, increased returns and realization of particular targets.

In early 2016, a worldwide survey of 200 top investment executives sought to learn about the experts...


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