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Largest stocks versus the largest countries in the index (ex UK, US and Japan*) Microsoft Corporation
Amazon.com Apple
Alphabet (Class A) Exxon Mobil Corporation Alphabet (Class C) JPMorgan Chase & Co. Johnson & Johnson Facebook (Class A)
Nestle S.A. Australia
Netherlands Hong Kong
Sweden Spain
Italy Market Capitalisation (%) *Largest nations by market capitalisation excluding US, Japan and UK Source: MSCI France
Switzerland Canada
Germany
Factor-based investing: a potential alternative
For investors looking to keep the benefits of passive investing (low cost, high liquidity, limited govern- ance) then factor-based investing presents a compelling alternative. Factor-based investing systematically allocates to stocks based on technical information and company fundamentals targeting specific drivers of return. Evidence shows that, if properly constructed, it ought to add value over and above the market cap equivalent over the long term. Another benefit is that no single stock should dominate the index. Factor-based investing is not a silver bullet but, in potentially volatile times, it avoids taking large bets on individual companies, which may be an advantage. If you are a passive investor, the chances are it has worked well in recent times. But now may be the right time to reconsider how you gain exposure to equity markets.
For more details, contact Andy Peach at
andrew.peach@
aon.com
Disclaimer
This document and any enclosures or attachments are prepared on the understanding that it is solely for the benefit of the addressee(s). Unless we provide express prior written consent, no part of this document should be reproduced, distributed or communicated to anyone else and, in providing this document, we do not accept or assume any responsibility for any other purpose or to anyone other than the addressee(s) of this document. Notwithstanding the level of skill and care used in conducting due diligence into any organisation that is the subject of a rating in this document, it is not always possible to detect the negligence, fraud, or other misconduct of the organisation being assessed or any weaknesses in that organisation’s systems and controls or operations.
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September 2019 portfolio institutional roundtable: Factor investing 23
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