Index provider MSCI has launched a set of indices to allow institutional investors to gain passive exposure to several equity factors at the same time.
Factors, such as company size or the momentum of a stock, are tools to categorise sources of risk and return in the equity market and have been applied by analysts since the 1970s.
“Combining factor indexes makes sense from a diversification standpoint,” says Remy Briand, head of MSCI index research. “Factor returns have historically been quite cyclical, with some factors underperforming the market cap-weighted benchmark for several years in a row. Combining factors has historically yielded a smoother ride over time.”
The MSCI Multi-Factor Indexes are available in standard combinations or in a customised mix designed by the client, and are based on major indices such as the MSCI World.
MSCI says the indices can help to diversify a client’s portfolio and are complementary to traditional capitalisation-weighted indices.
©2013 funds europe
