FACTORING IN FACTORS
> Call it factor investing, strategic, alternate, or smart beta.
It all boils down to the same thing: accessing the return
that comes from exposure to non-market risk factors, as
opposed to the return stemming from risk associated with
the broad market. Tilting towards certain non-market risk
factors can be seen as appealing because, under the right
conditions, they may offer their own premia. This kind of
strategy may also be helpful in diversifying a portfolio, as
historically, there have been lower correlations between
factors than between asset classes.1
Roger G. Clarke, Harindra de Silva, Robert Murdock. (Fall 2005). A factor approach to asset allocation. The Journal of Portfolio Management.
1
From A(ctive) to P(assive)
Before the first factor indices and associated products were launched, investors had to rely primarily on active managers for
exposure to smart beta strategies. Indexizing factor approaches has made them widely available to a broad array of investors
through new products. Because they’re passive, investment vehicles based on factor indices can offer exposure that’s cheaper,
more accessible, and more efficient than ever.
The Factor Spectrum
Historically, all of these factors have
exhibited their own distinctive
patterns of performance
over market
cycles.
S&P DJI offers indices tracking the following factors:
SIZE
VALUE
VOLATILITY
MOMENTUM
DIVIDENDS
QUALITY
SHARE
REPURCHASES
STATISTICAL SUMMARY OF THE S&P 500® SMART BETA INDICES AND THE S&P 500
S&P 500
Equal
Weight
S&P 500
Pure Value
S&P 500
Low
Volatility
S&P 500
Momentum
S&P 500
Quality
S&P 500
S&P 500
Dividend
Aristocrats® Buyback
S&P 500
Annual Return (%)
9.09
11.34
10.05
2.65
9.39
10.28
11.91
4.34
Annual Volatility (%)
17.69
22.24
11.27
16.92
13.66
13.76
16.32
15.52
Sharpe Ratio
0.42
0.43
0.74
0.05
0.56
0.62
0.62
0.17
Sortino Ratio
0.61
0.64
1.08
0.07
0.83
0.94
0.93
0.23
Percentage of Months
With + Returns
61.7
66.7
64.4
63.3
65.0
65.0
64.4
63.9
Best Monthly Return (%)
18.7
32.1
9.4
11.5
10.5
12.2
16.3
11.1
Worst Monthly Return (%)
(21.1)
(22.3)
(12.8)
(21.4)
(16.3)
(13.2)
(21.2)
(14.8)
RATIOS
Extreme Risk Statistics
PERFORMANCE RELATIVE TO THE S&P 500
Monthly Alpha (%)
0.37
0.58
0.61
(0.07)
0.46
0.56
0.65
Beta to Market
1.10
1.19
0.55
0.92
0.84
0.76
0.89
Beta in Up Market
1.17
1.26
0.50
0.69
0.86
0.87
0.95
Beta in Down Market
1.09
1.23
0.58
0.94
0.84
0.76
0.93
Correlation with S&P 500
0.95
0.82
0.74
0.83
0.94
0.84
0.84
Maximum Drawdown
(54.9)
(70.1)
(35.4)
(59.9)
(44.4)
(44.1)
(53.0)
(49.2)
Peak Date
May-07
May-07
May-07
Aug-00
Oct-07
May-07
May-07
Oct-07
Trough Date
Feb-09
Feb-09
Feb-09
Feb-03
Feb-09
Feb-09
Feb-09
Feb-09
No. of Months From
Peak to Trough
21
21
21
30
16
21
21
16
Recovery Length
(No. of Months)
23
37
22
125
24
20
23
37
DRAWDOWN HISTORY
Source: S&P Dow Jones Indices and/or its affiliates. Data from Dec. 31, 1999 to Dec. 31, 2014. This chart is provided for illustrative purposes only. Past performance is no
guarantee of future results. This chart reflects hypothetical performance. Please see the Performance Disclosure at the end of this document for more information regarding
the inherent limitations associated with back-tested performance.
Combining Factors
S&P DJI offers a broad suite of factor indices, giving investors the tools to design
a custom smart beta strategy. Our indices range from those covering a single
factor to those that combine multiple factors and encompass a wide range of
regions, spanning developed and emerging markets. All of these variables help
investors manage the types and levels of risk they take on. Our factor indices
feature transparent, publicly available methodologies so investors can understand
how index constituents are selected and how index values are calculated.
In addition to the featured indices
below, we also offer factor-based
strategies as overlays on our
global benchmark, the S&P Global
BMI, and its regional subindices.
FEATURED SMART BETA INDEX OFFERINGS AND RELATED PRODUCTS
Index
Currency
Bloomberg
Ticker
Exchange Traded Product
ETF Ticker
db x-trackers S&P 500 Equal Weight ETF
XSEW LN
db x-trackers S&P 500 Equal Weight UCITS
ETF DR - 1C
XDEW
Guggenheim S&P Equal Weighted ETF
RSP
iShares S&P 500/Citigroup Value (ETF)
IVE
SPDR S&P 500 Value ETF
SPYV
Vanguard S&P 500 Value ETF
VOOV
SIZE
S&P 500 Equal Weight
USD
SPW
VALUE
S&P 500 Value
USD
SVX
S&P 500 Pure Value
USD
SPXPV
Guggenheim S&P 500 Pure Value ETF
RPV
S&P 500 Enhanced Value
USD
SPXEVUP
PowerShares S&P 500 Value Portfolio
SPVU
USD
SP5LVI
PowerShares S&P 500 Low Volatility
Porftolio (ETF)
SPLV
SPDR S&P 500 Low Volatility ETF
SPY1 GR
PowerShares S&P 500 Momentum Portfolio
SPMO
ProShares S&P 500 Aristocrats ETF
NOBL
Amundi ETF S&P 500 Buyback UCITS ETF
BYBE
SPDR S&P 500 Buyback ETF
SPYB
Kyobo Axa Power LVHD ETF
192720
PowerShares S&P 500 High Dividend
Portfolio
SPHD
VOLATILITY
S&P 500 Low Volatility
MOMENTUM
S&P 500 Momentum
USD
SP500MUP
USD
SPXQUP
USD
SPDAUDP
USD
SPBUYUP
S&P GIVI® Global
USD
SPVGLUP
S&P 500 Low Volatility High Dividend
USD
SP5LVHD
QUALITY
S&P 500 Quality
DIVIDENDS
S&P 500 Dividend Aristocrats
SHARE REPURCHASES
S&P 500 Buyback
MULTI-FACTOR
Source: S&P Dow Jones Indices LLC. Data as of February 15, 2016. Charts are provided for illustrative purposes.
CONTACT INFORMATION
Beijing 86.10.6569.2770
Dubai 971 (0)4 371 7131
Hong Kong 852 2532 8000
New York 1.212.438.2046
London 44.207.176.8888
1.877.325.5415
Sydney 61 2 9255 9802
Tokyo 81 3-4550-8564
VISIT US
www.spdji.com
PERFORMANCE DISCLAIMER
The S&P 500 Dividend Aristocrats was launched on May 2, 2005. The S&P 500 Enhanced Value Index was launched on April 27, 2015. The S&P 500 Equal
Weight Index was launched on Jan. 8, 2003. The S&P 500 Pure Value was launched on Dec. 16, 2005. The S&P 500 Low Volatility Index was launched on
April 4, 2011. The S&P 500 Momentum was launched on Nov. 18, 2014. The S&P 500 Quality Index was launched on July 8, 2014. The S&P 500 Buyback
Index was launched on Nov. 29, 2012. The S&P 500 was launched on March 4, 1957. All information presented prior to this Launch date is back-tested.
Back-tested performance is not actual performance, but is hypothetical (see below). The back-tested calculations are based on the same methodology
that was in effect on the Launch date. The Launch date designates the date upon which the values of an index are first considered live, which S&P Dow
Jones Indices considers to be the date by which the values of an index are known to have been released to the public, for example via the company’s
public Web site or its datafeed to external parties.
Past performance of an Index, whether actual or back-tested, is no guarantee of future results. Performance shown does not necessarily correspond to
the entire available history of an Index. For details about any Index of S&P Dow Jones Indices, including the manner in which it is rebalanced, the timing
of such rebalancing, criteria for additions and deletions, as well as all index calculations, please refer to the methodology paper for that Index available
at www.spdji.com or www.spindices.com.
It is not possible to invest directly in an Index, and Index returns shown do not represent the results of actual trading of investable securities or other
assets. S&P Dow Jones Indices maintains indices and calculates index levels and performance, but does not manage actual assets. Consequently, Index
returns do not reflect any expenses or sales charges an investor would pay to purchase or hold securities underlying an Index or any investment fund or
product intended to track the performance of the Index. The imposition of these expenses and charges would cause actual and back-tested performance
of the securities or investment fund/product to be lower than the Index performance shown.
Back-tested returns. S&P Dow Jones Indices may show performance returns by applying an Index’s methodology to historical data to produce
“back-tested” (hypothetical) returns for periods prior to the Launch date of the Index. A limitation of back-tested information is that it reflects the
application of the Index methodology and selection of Index constituents in hindsight. No theoretical approach can completely account for the impact of
decisions that might have been made during the actual operation of an index; for example, there are numerous factors related to the equities (or fixed
income, or commodities) markets in general which cannot be, and have not been, accounted for in the preparation of back-tested Index information.
GENERAL DISCLAIMER
© 2016 by S&P Dow Jones Indices LLC, a part of McGraw Hill Financial, Inc. All rights reserved. Redistribution, reproduction and/ or photocopying in
whole or in part are prohibited without written permission. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial
Services LLC (“S&P”), a subsidiary of McGraw Hill Financial, Inc. Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow
Jones”). S&P Dow Jones Indices LLC, Dow Jones, S&P and their respective affiliates (“S&P Dow Jones Indices”) makes no representation or warranty,
express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and S&P Dow
Jones Indices shall have no liability for any errors, omissions, or interruptions of any index or the data included therein, or for results obtained from use
of content provided. Past performance of an index is not an indication of future results. This document does not constitute an offer of any services. All
information provided by S&P Dow Jones Indices is general in nature and not tailored to the needs of any person, entity or group of persons. S&P Dow
Jones Indices receives compensation in connection with licensing its indices to third parties.
It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments offered
by third parties that are based on that index. S&P Dow Jones Indices does not sponsor, endorse, sell, promote or manage any investment fund or other
investment vehicle that seeks to provide an investment return based on the performance of any Index. S&P Dow Jones Indices LLC is not an investment
advisor, and S&P Dow Jones Indices makes no representation regarding the advisability of investing in any such investment fund or other investment
vehicle. Credit-related and other analyses, including ratings and market analyses, are opinions as of the date they are expressed and are not statements
of fact. S&P Dow Jones Indices LLC is analytically separate and independent from any other analytical group within McGraw Hill Financial. For more
information on any of our indices please visit www.spdji.com