Mar 25, 2022
Eurex
The diversification benefits of a multi-factor approach – Qontigo’s blog post
It’s official; incorporating multi-factors in your portfolio can contribute to portfolio diversification and active returns. The researchers at Qontigo (Axioma) wrote a blog article describing their analysis of the performance of the Multi-factor indices and the benefits of implementing multi-factor strategies into an investment portfolio.
Standard factor indices, as calculated by STOXX®, target high exposures to proven sources of excess returns and manage liquidity and unintended risk exposures. Building on those factors, STOXX® also calculates the STOXX® Industry Neutral Single Factor Indices. They reduce the active industry constraint from +/- 5% to near neutral. These Indices may sacrifice some factor exposure but benefit from targeting lower levels of active industry risk and avoiding potential performance drag from industry returns. The STOXX® Europe 600 Industry Neutral Ax Multi-Factor Index combines all five single-factor indices on an equal-weight basis.
According to the analysis, the multi-factor index outperformed its parent index and benchmark, the STOXX® Europe 600, by more than 500 basis points annually, with a realized tracking error of just under 5%, making a clear argument for the advantages of investing in a style-based strategy.
Our product offering
The Eurex offering is based on Qontigo’s STOXX® Industry Neutral Ax Factor Index suite and comprises futures based on the five standard factors: Value, Momentum, Low Risk, Quality and Size. An additional Multi-Factor Index Future, which combines the five exposures in one product, is also included. The futures cover factors in both European and U.S. markets, represented by the STOXX® Europe 600 and the STOXX® USA 500 universe.
