belgiumnl

Enhanced indexing

Enhanced indexing strategies are designed to systematically capture the market return and, in addition, benefit from well-rewarded factor premiums.

They take the capitalization-weighted index as a starting point. Then they give slightly more weight to stocks with favorable factor characteristics and slightly less weight to stocks with unfavorable factor characteristics, using proprietary investment models. This enables both relative cost effectiveness and prevents overcrowding and arbitrage. The key performance indicator for this kind of product is the information ratio, which measures the excess returns of a portfolio relative to its benchmark.

Enhanced indexing portfolios typically deliver moderate outperformance, or at least market-like returns after costs, depending on how much portfolios are allowed to deviate from their benchmark. Portfolios with greater tracking error flexibility are more suitable for investors who aim to capture more of the factor premiums in a consistent way. Our research shows that the looser the tracking error criteria, the higher the expected returns tend to be.

Enhanced indexing also enables comprehensive ESG integration. For example, ranking methodologies based on sustainability scores can be introduced in the portfolio construction process. Meanwhile, passive investors either completely ignore ESG considerations or limit their efforts to rigid exclusion lists.

Quantitative investing: invisible layers surface to deliver attractive returns
Quantitative investing: invisible layers surface to deliver attractive returns
Read more
Factoring carbon taxes into a Value strategy
Factoring carbon taxes into a Value strategy
Incorporating carbon taxes into a Value strategy at a stock level is equivalent to imposing carbon footprint constraints on the overall portfolio.
22-12-2021 | Research
Research on pre-1926 database reveals equity factors are ‘eternal’
Research on pre-1926 database reveals equity factors are ‘eternal’
New research reveals that equity factor styles have existed and persisted since the mid-19th century.
21-12-2021 | Research
Talk ‘22: 'Op koers blijven is cruciaal'
Talk ‘22: 'Op koers blijven is cruciaal'
Covid-19 heeft ons geleerd dat het belangrijk is om vast te houden aan je aanpak, zegt Wilma de Groot, co-hoofd van Quant Equity Portfolio Management.
17-12-2021 | Interview
Logo

Disclaimer

De informatie op deze website is uitsluitend bedoeld voor professionele partijen. Een professioneel belegger is: een belegger die beroepsmatig over voldoende kennis, deskundigheid en ervaring beschikt om de financiële risico’s van de zelf genomen beleggingsbeslissing(en) adequaat in te schatten.

Bezoekers van deze website dienen zich ervan bewust te zijn dat zij zelf verantwoordelijk zijn voor naleving van alle in hun eigen land geldende wetten en voorschriften.

Door op Akkoord te klikken, bevestigt u dat u een professionele belegger bent. Indien u op Niet akkoord klikt, wordt u doorverwezen naar de omgeving voor particulieren.

Niet akkoord