Gulf News

In­vestors adopt­ing fac­tor-based al­lo­ca­tions

Key driver for fur­ther in­creases is bet­ter net per­for­mance

- Staff Re­port

In­sti­tu­tional and whole­sale in­vestors are in­creas­ingly adopt­ing fac­tor-based al­lo­ca­tions as part of their port­fo­lios, ac­cord­ing to the third an­nual In­vesco Global Fac­tor In­vest­ing Study.

The trend is ex­pected to con­tinue with three-fifths of in­vestors over­all (64 per cent of in­sti­tu­tional and 56 per cent of whole­sale in­vestors) plan­ning on in­creas­ing fac­tor al­lo­ca­tions by 2021.

Over 300 whole­sale and in­sti­tu­tional in­vestors with as­sets un­der man­age­ment (AUM) to­talling more than $19 tril­lion (Dh70 tril­lion) were in­ter­viewed for this study.

The key driver for fur­ther in­creases in al­lo­ca­tions by in­vestors is, by some dis­tance, bet­ter net per­for­mance, fol­lowed by cost-ef­fec­tive­ness and two di­men­sions of risk re­duc­tion.

“Fac­tor in­vest­ing is grow­ing on a broad scale across all ma­jor re­gions, in­clud­ing the Mid­dle East, and the ba­sic ar­gu­ments for in­creas­ing us­age of fac­tor-based ap­proaches also res­onate in the Mid­dle East. Fac­tor strate­gies, still usu­ally ap­plied to eq­uity mar­kets, are in­creas­ingly be­ing used with the in­ten­tion to en­hance re­turns, man­age risks and, to a lesser ex­tent, re­duce costs,” Ge­org El­saesser, se­nior port­fo­lio man­ager, quan­ti­ta­tive strate­gies at In­vesco, told Gulf News.

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