Investors Getting More Comfortable with Factor Investing

An article in WealthManagement reports that factor investing has gained acceptance and an increase in demand, as evidenced by an Invesco study that involved interviews with key decision makers of more than 300 institutional and wholesale factor investors.

“However,” the article continues, “the Invesco study highlighted that nearly half of the investors adopted factor investing for the first in 2015 or more recently.” The study also found that factor investing generally began with a single strategy, but that investors typically moved to implement between two to four strategies.

According to the article, a compelling finding from the study was that the lack of “internal capabilities” was the most common barrier to factor investing, with the second most common barrier being lack of available products. The study also found that equity single factors were the most common approach, closely followed by equity multi-factor approaches.

The article concluded, “While value and low volatility strategies lagged in recent periods, including the first half of 2018, investors would have been better off having exposure also to momentum and quality. Yet, in recent months, value and low volatility investing returned to favor.”