Factor investing | Feature


Factor investing: Growing pains


Factor investing is moving into fixed income, but, asks Elizabeth Pfeuti, are investors ready?


When faced with a problem, it is tempting to look for a silver bullet.


Risk factor investing, with supporters including some of the world’s most sophis- ticated investors, has been put forward by some as such a cure-all for the funding ail- ments of pensions around the world. In the guise of smart beta, the approach has taken the equities world by storm. Most major fund managers operate strategies using factors under this terminology, with investors of all sizes and sophistication holding them in their portfolio. The next big move for the approach is into fixed income, where pension funds are increasingly holding their assets – 50%, according to Mercer’s latest European Asset Allocation survey. Some of the world’s largest fund houses are muscling in on the action, launching smart beta fixed income exchange-traded and mutual funds over the past 12 months. There are plenty of reasons behind the suc- cess of the risk factor approach, according to its advocates.


Issue 83 | April 2019 | portfolio institutional | 39


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