Global indexing giant MSCI has rolled out a new factor investment system spanning multiple asset classes.
The MSCI Multi-Asset Class Factor Model “helps investors analyze key portfolio exposures across asset classes through an integrated and consistent framework”, the group said in a statement.
Factor investing, also known as ‘smart beta’, has ballooned in recent years with fund managers and index providers scrambling to meet demand. Last year a survey by another index behemoth, FTSE Russell, found about half of large asset-owners globally had invested in smart beta strategies with a further 25 per cent intending to allocate to factor funds in the near term.
For example, the NZ Superannuation Fund, which has already plonked over $1 billion in factor strategies, is poised to up its allocation to smart beta investments, chief executive, Matt Whineray, said last year.
While smart beta has been traditionally limited to equities, MSCI says its just-released model will enable investors to identify, manage and combine factors across a wide range of asset classes including fixed income, commodities, and currencies.
MSCI says the growth of multi-strategy, outcomes-oriented and balanced fund styles has seen more investors exposed to “complex, dynamic” risk and return drivers.
“The changing investment landscape and access to a greater number of multi-asset class factors is shifting many portfolios to actively allocate across asset classes,” the indexer says. “As the demand for new sources of alpha across asset classes increase, there is a need for a multi-tiered, multi-asset class factor model to provide consistency throughout the investment process.”
As well as introducing factor strategies beyond equities, MSCI says its new model can help investors:
- shift from traditional asset allocation to factor-based asset allocation;
- condense thousands of underlying exposures to a group of “key risk and return drivers; and,
- communicate multi-asset class portfolio investments more easily.
Peter Zangari, MSCI global head of research and product development, said in the release: “The growth of factor investing has transformed the way investors view their portfolios, underscoring the importance of factor awareness in active portfolio management.
“As leaders in research-driven factor and multi-asset class model innovation, we are committed to helping our clients navigate the complex nature of the global markets and enhance their investment approach.”