Factor investing is an investment approach that aims to generate higher risk-adjusted returns by systematically selecting securities according to proven drivers of returns – factors. These include quality, value, momentum, low volatility and others. BNP Paribas Asset management has been among the leaders in factor investing since 2009. Our quantitative team consists of more than 40 professionals with an average of 15 years’ experience, and regularly contributes to academic research and industry thought leadership.
WHY FACTOR INVESTING?
Factor investing is an innovative approach that lies at the crossroads of passive, discretionary and alternative strategies. With the expertise of a skilled investment manager, it can offer a number of benefits.
- A source of active returns building on proven and efficient long-term sources of performance
- Robust risk controls that can help keep a portfolio in line with the preferred risk budget
- Diversification from more traditional investments
- Integration of Environmental, Social and Governance (ESG) principles that can enhance returns and better mitigate risk, while meeting sustainability goals
WHAT MAKES US DIFFERENT?
We have been managing factor-based strategies for a decade, both in equities and fixed income. Over the course of the years, our combination of fundamental, academic and quantitative modelling expertise has resulted in a robust investment platform, which today fully integrates sustainability and climate change considerations.
Underpinning our platform are several key features that, we believe, can lead to better client and portfolio outcomes.
- In-depth research: Quantitative research is at the heart of our investment process. Our strategies are based on in-house research conducted by our Quantitative Research Group (QRG), a highly experienced team of specialists that focus on the application of ideas and themes into the design of quantitative solutions and development of capabilities.
- Factor risk targeting: Our research has shown that factor timing does not improve risk-adjusted returns over the long run. Instead, we believe maintaining a balanced targeted risk exposure to factors that exhibit low correlations is important and leads to significantly higher information ratios.
- Transparency: When designing factor-based strategies, we always seek to avoid unnecessary complexity. Not only do we believe this helps build robust solutions, it is also important in making our multi-factor strategies understandable and transparent for our investors.
- A systematic process: We believe in having a fully systematic investment process, for better discipline and efficiency. Being statistically robust and scientifically sound also allows us to produce reliable historical simulations to assess the long-term behaviour of our strategies.
OUR INSIGHTS AND RESEARCH
Through our quantitative research team we publish detailed academic papers and regular thought leadership articles that highlight the potential benefits of quantitative and factor investing. We strongly believe in investigating and researching before expecting clients to invest.
Factor investing in equities and corporate bonds: Neutralising bias
Measuring the factor exposures of sustainability and low-carbon investing in equities
Benefits of an allocation to Low Volatility Equities for risk-averse investors
|Style factors are not the only factors that explain stock and corporate bond returns. Making sure that other factors do not pollute your portfolio can make all the difference.||We discuss why factor investing is well suited to integrating sustainability considerations, and the benefits of being socially responsible.||Risk-averse investors may want to consider investing in a low-volatility equity strategy, which can offer better risk-adjusted returns and significant outperformance in equity bear markets.|
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We are able to offer investors a variety of solutions that target single or multiple factors across asset classes and geographies. Moreover, our solutions can be fully customised to meet different investor needs: the return they expect, the level of risk they are willing to take, and the sustainability objectives they seek.
To learn more about our tailored solutions, please download our Practical Guide to Multifactor Investing.
To learn more about some of our out-of-the box solutions, please view the funds below.
GLOBAL LOW VOL EQUITY – EUR
EURO MULTI-FACTOR CORPORATE BOND
US MULTI-FACTOR EQUITY
|Rated 5 stars by Morningstar*, this fund aims to generate higher risk-adjusted returns over the medium to long term by exploiting low volatility stocks.||A systematic multi-factor approach that invests predominantly in investment grade corporate bonds denominated in EUR.||Rated 4 stars by Morningstar*, this funds follows a multi-factor approach that seeks to provide diversified exposure to US large-caps.|
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*Ratings as of October 2019
Investments are subject to market fluctuations and the risks inherent in investments in securities. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay, the strategies described being in risk of capital loss. There is no guarantee that the performance objective will be achieved. Past performance or achievement is not indicative of current or future performance. Copyright © 2019 Morningstar, Inc. All Rights Reserved. The overall star rating for each fund is based on a weighted average of the number of stars assigned to it in the three-, five-, and 10-year rating periods. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.