Equity Factors: Investor Views and Research Insights

We surveyed global institutional investors and wealth managers to gain insights into investors’ current thinking regarding equity factors and their evolving role in asset allocation, and to learn how investors believe traditional factor strategies should evolve to better serve the increasingly complex investment landscape. 

The resulting paper details five key insights from the survey, as well as from recent research:

• Investor faith in equity factors increased. Despite recent lackluster performance of some factors, investors placed style-factor allocations, ahead of stock selection, sector or country-based allocations in their ability to generate alpha.
• Many have shifted to value and quality. Some investors believe that the growth to value rotation that started towards the end of 2020 has not fully matured while some have a positive outlook on the quality factor.
• Factors are seen as key elements of active performance. Both asset managers and asset allocators are increasingly reliant on factor performance attribution to decompose the risk and return of portfolios.
• Investors don’t view factors and factor strategies as static. Investors believe that factor definitions should evolve through time and new factors may be discovered from alternative datasets or using advanced techniques, such as machine learning.
• Different investment characteristics have converged. Investors are focused on the synthesis between factor investing and different investment characteristics, including ESG factors and megatrends driving transformational changes in the broader economy.