Strategies that provide access to a combination of investment factors - such as Momentum, Value, Quality and Volatility - combining them using a consistent methodology.
You want to combine multiple factors effectively to address the cyclical underperformance in any given strategy or tailor the combination of factors to reflect your investment beliefs, preferences, risk tolerances and objectives.
Combining multiple factor returns acts to smooth out different factor cycles and to reduce volatility associated with individual return sources, leading to more consistent returns over time. However, when combining multiple factors, you need to give careful consideration to the design and specification of the individual factors to ensure they have common features that allow them to be combined without one dominating the others. Through embedded advice, research and specialist implementation capabilities, we can help you build a transparent framework for multi-factor portfolio construction that efficiently captures the factors robustly through time, is well-diversified and aligns the aggregate factor characteristics to your objectives.
Case study & Papers
Multi-asset equities factor portfolio delivers greater control and flexibility
A large multi-asset portfolio manager replaced its passive global equities mandate ($AUD1 billion) with a custom smart beta multi-factor exposure. Russell Investments' Customised Portfolio Services provided the manager with greater control and flexibility in managing underlying factor exposures and increased efficiency in managing associated currency exposures.
Cost efficient access to investment factors
Dynamic management of factor, country and sector exposures
Enhanced risk return profile vs passive14
Introducing the Russell Multi-Factor Equity Portfolios
In this paper, we introduce a framework to combine four of the most common equity risk factors at the strategic level, helping you avoid common pitfalls in factor investing and allowing you to tailor your factor allocation to your preferences.
Reduces risk of one factor underperforming at a given time
reduced to 2.3%22
increase in Sharpe Ratio relative to benchmark
Inside Smart Beta: Making sense of investment factors
To complement active management, investors are increasingly looking to smart beta to optimise their portfolio. But which smart beta factors (value, momentum, low-volatility, quality, size) are right for you? Russell Investments suggest the answer requires a careful look at risk, return and correlation between factors.
Highest factor return from value21
4 common smart beta factors
Strategy based vs factor based
The Russell Portfolio Decarbonisation Strategy
Decarbonisation is increasingly becoming a part of investment policies and is impacting both active and passive investment strategies. In this research paper we investigate different approaches to reducing the carbon footprint of an equity portfolio without materially impacting performance.
index produces >80% of carbon footprint
sectors emit 2/3rd of carbon footprint in index
4 approaches to portfolio decarbonisation reviewed