Harness the Power of Multi-Factor Investing with the Chaikin Power Gauge
Did you know that 75% of investors who are evaluating smart beta
iWe refer to smart beta as "strategic beta," which are strategies that bridge the gap between active and passive management. These ETFs are registered as passive ETFs and might use an index-based or rules-based methodology, but employ an investment approach for an intentional purpose other than providing traditional asset class exposure. strategies are considering a multi-factor
iA multi-factor investment approach combines two or more factors to help create more diversified solutions. A factor is a characteristic relating to a group of securities that helps explain their risk and return. The six most widely recognized risk "premium" factors include: value, size, momentum, low volatility, dividend yield, and quality. approach?¹ The recent exploding growth of single-factor ETFs has given way to the latest trend of multi-factor investing. IndexIQ has partnered with Chaikin Analytics to provide their latest smart solution:
Single factors have been highly cyclical from year to year, and timing can be a difficult endeavor.
Most factor returns generally are not highly correlated with one another, a diversification benefit.
Combining multiple factors may help create a more diversified solution that seeks to potentially enhance returns over time.
Source: Morningstar, as of 3/31/17. Analysis conducted from 12/31/04-12/31/16. Optimum Factor Weights (max. 25%) apply a 25% maximum weight to any one factor when forming an optimized portfolio. Equal Factor Weights apply an equal weight to each factor when forming an optimized portfolio. The Market is represented by the S&P 500 Index. Standard deviation is a measure of the dispersion of a set of data from its mean. Past performance is no guarantee of future results, which will vary. It is not possible to invest directly in an index.
Why Small Caps?
Domestic-focused small caps have less dependency on global events and often had positive returns during rising rate periods.
Source: Morningstar, as of 5/1/17.
Historically outperformed large-cap stocks and have recovered faster from downturns.
Particularly attractive now, as earnings growth expectations have turned more favorable versus this time last year.
Source: Thomson Reuters Datastream, as of 7/11/17. Earnings-per-share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock.