Using a simulation-based analysis, we demonstrate that in periods of high market concentration, both asset owners and asset managers could potentially benefit from considering a benchmark-splitting approach. 

We look at trends in flows and assets under management for small-cap funds across all domiciles since December 2018. Beginning in 2021, net flows have been positive, although the trends for actively managed and index funds have differed. 

We propose a risk-based framework to aid asset allocators, including wealth managers, in better understanding active ETFs as an investment category and to help discern between genuinely active strategies and enhanced indexing. 

Over the last nearly 50 years, changes in interest rates have had a more pronounced impact on the performance of factor and sector indexes than the rate level itself. Insights from these findings may be helpful in realigning portfolios to a shifting macro view. 

Geopolitical events tend to have a spillover effect on multinational companies in the affected geographic region. In view of the Israel-Gaza crisis, we analyzed the economic exposures and risks of companies in the MSCI ACWI IMI to the Middle East. 

In response to deglobalization, multinational corporations are making changes to their logistics networks. Using MSCI Economic Exposure data, we examine how small-cap stocks around the world may be impacted. 

Across regions — U.S., international and emerging markets — small-cap stocks have displayed higher cross-sectional volatility than other market-cap segments. Small caps’ wide dispersion indicates potentially fruitful stock-selection opportunities.

High-net-worth investors are seeking portfolios tailored to their financial goals, personal values and tax situation. Wealth managers need scalable solutions. We explore using factor, thematic and sustainable investing to customize portfolios.    

We explore the methodologies behind the MSCI ESG Indexes to see how they integrate ESG considerations. We also assess the differences of these approaches in terms of the financial and ESG characteristics to understand potential trade-offs. 

Two measures of concentration risk indicate historically low levels for small-cap stocks in contrast to the higher levels of their large-cap counterparts.

Inflation appears to have peaked at the end of 2022, but it remains influential in capital markets. We analyzed nearly 50 years of data to assess how small caps’ performance has changed with shifts in both the level and trend of inflation.  

Some investors are already evaluating opportunities offered by a post-slowdown world. One of these opportunities is small-cap stocks, which have historically outperformed large caps, especially after recessions.  

An analyst’s equity opinion encompasses how different interrelated forces may impact the future performance of a company. We sought to define the analyst-sentiment factor, while assessing its relationship with other traditional equity style factors. 

The past decade's market turbulence, rising inflation and fluctuating rates, has emphasized the importance of high-quality firms. This update to earlier research examines the quality factor’s role in navigating an ever-changing landscape. 

Since April 2020, companies in the oil, gas and consumable-fuel industry outperformed broad equity markets across the globe. Moreover, U.S. firms have outperformed their European counterparts. What drove this performance?

Looking at the collapse of Silicon Valley Bank and Signature Bank, and the takeover of Credit Suisse through the lens of factors provides a unique view of how markets reacted to questions about the health of banks and other financial institutions.

While the direct market impact of Russia’s invasion has lessened over time, there have been longer lasting effects that have exacerbated investor concerns around inflation, rising rates and central bank actions around the globe. We examine the issue through a multi-asset-class lens.

Markets have partially recovered since Russia invaded Ukraine, but questions remain about inflation, economic growth and central banks’ actions. Understanding last year’s performance across asset classes, may help with investment decisions in 2023.

Innovation investing has gained momentum over the past few years. Our research focuses on systematically investing in companies that seek to capitalize on opportunities created by megatrends and innovation-driven themes.  

Asset owners who want to keep global warming below 1.5 degrees Celsius (1.5°C) have a tough row to hoe.

While global inflation has accelerated over the last few months, the expectation for some countries is that inflation has peaked while others anticipate further increases.

Industry and revenue lenses can provide additional insights to investors beyond a traditional sector analysis.

Investors are increasingly incorporating ESG and climate considerations in asset selection. With that in mind, our research focuses on ESG and climate profiles in relation to equity yield and tracking error.

Inflation in the U.S. has accelerated over the last 18 months to a high of 8.5% in March (8.3% in April), a level that was last observed in the early 1970s.

Looking at sectors through a factor lens may provide additional insights for investors in terms of explaining performance.

The global market rally that began in April 2020 came to a halt with a sell-off that started at the end of last year and increased in intensity this February with the invasion of Ukraine.

Along with other factors, comparing current sector valuations to longer-term averages has helped investors as they make decisions about whether to rotate in or out of specific sectors.

Our research has shown that an industry momentum approach, which involves investing in industries with the best recent performance, outperformed broad-market equity indexes in developed-market regions from 2000 to 2021.

When considering new sector exposures in their portfolios, investors can review correlations between existing and potential allocations to better understand whether these sectors’ returns moved in the same direction or if exhibited a differentiated return pattern. 

U.S. Fed Chairman, Jerome Powell, has made it official: We can no longer label the period of current inflation as transitory. 

When investors construct portfolios, they may do so based purely on bottom-up stock selection, or they may incorporate an element of top-down construction by adjusting the portfolio’s allocation to sectors, countries or factors.

Whether due to stimulus, deglobalization, decarbonization or an overheating economy, higher inflation could have an impact on style-factor and sector performance. We investigate this impact in the context of two potential economic-growth regimes.

Small caps are usually thought of as having a greater carbon footprint relative to their larger counterparts. 

As more investors incorporate ESG considerations into their investment decisions, some companies have changed their behavior, which has led to changes in their ESG profiles.

Given small-cap outperformance since March 2020, investors are asking how these stocks size up in terms of short-term valuation, sentiment and macro outlook? Longer term, might small caps help capture opportunities around thematic investing megatrends?

Market sentiment isn’t static, and we have seen that recently with the gradual reopening of the economy and its impact on the performance of small-cap companies.

Another way to deepen our understanding of small-cap stocks is to look at them through a style-factor lens. 

Equities have traditionally been viewed as a hedge against inflation, based on the assumption that companies’ revenues adjust for inflation over time. But what has been the short-term impact on equity portfolios?

Momentum, by definition, rotates into securities with recent outperformance. That said, investors who view value and momentum as contra-signals may have questions about the value-momentum convergence and the divergence of momentum and growth.

U.S. equity markets have experienced increased volatility coupled with concentration in a handful of megacap companies. Has this hampered investors’ ability to capture factors effectively? Have stock-specific risks dominated factor indexes?

A new administration in the U.S. and ESG-related regulations in Europe may further increase investors’ sustainability focus. We examine an “ESG-first” approach to integrating measurable ESG and climate considerations into portfolios.

Kuwait’s reclassification from frontier to emerging market and inclusion in the MSCI Emerging Markets Index provides investors exposure to yet another Gulf Cooperation Council member, one that has worked to open its doors to foreign investors.

Single-factor portfolios seek high exposure to a target factor and limited exposure to non-target ones. We assess the impact that common portfolio weighting schemes have on these exposures, as well as on portfolio efficiency, concentration and investability.

How to define a factor? It’s a challenge for asset owners and wealth managers in evaluating how well factor products meet investment objectives. We found an improved and more robust measure can be formed by combining multiple descriptors. 

Building on previous MSCI research into the nuanced performance of the value factor, including the impact of sectors and other style factors, we look at how exposure to value drove the performance of actively managed value funds.

We know a lot about the relationship between companies’ ESG characteristics and financial performance. But was there a correlation between ESG scores and cost of capital?

During low interest-rate, high-volatility environments, some investors have turned to high dividend-paying stocks. However, overly simplistic approaches to selecting dividend-paying securities exposed investors to potential “yield traps.” Could these traps have been avoided?