SATRIX’S FACTOR TOOL

AT THE recent Satrix conference, The Future is Factor Investing, Kingsley Williams, the chief investment officer at Satrix, demonstrated the new Satrix Factor Tool, which measures to what extent any unit trust fund in the South African general equity category adheres to the investment styles, or factors, of value, quality and momentum. Williams said these are the three factors, according to Satrix research, that are best rewarded over time.

The tool analyses the holdings of a fund (to the extent that it can – some fund managers do not disclose all holdings) and the fund’s performance against market indices.

Personal Finance put the following questions to Williams:

At whom is the tool aimed? The tool is aimed at investment professionals who fulfil the role of portfolio constructors, such as discretionary fund managers, fund-of-fund managers, multi-managers and asset consultants. Financial advisers may also use the tool if they fulfil a portfolio construction role for their clients. Is there a fee to subscribe to use the tool? There is no fee. It is designed to educate the market on factor investing, so portfolio constructors are better equipped to consider factors when making investment decisions. What is Satrix’s motivation behind developing a tool that analyses active funds? When blending funds together into a portfolio (whether active or passive), the primary objective is typically to diversify the risk associated with a particular investment manager and their style of investing. Factors capture styles of investing, so by revealing the factor exposure of funds utilised within a portfolio blend, the investor has greater insights into whether their portfolio is well diversified from a style perspective, or whether a portfolio is overly exposed or significantly underexposed to a particular factor. Our aim is to use the tool as an opportunity to engage with portfolio constructors and clients on the role factor investing can play within their portfolios, and specifically how factor index funds provide a natural way for investors to achieve their objectives.