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Equity Smart Beta and Factor Investing for Practitioners


Equity Smart Beta and Factor Investing for Practitioners


1. Aufl.

von: Khalid Ghayur, Ronan G. Heaney, Stephen C. Platt

22,99 €

Verlag: Wiley
Format: EPUB
Veröffentl.: 29.05.2019
ISBN/EAN: 9781119583448
Sprache: englisch
Anzahl Seiten: 496

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Beschreibungen

<p><b>A guide to the popular and fast growing investment opportunities of smart beta </b></p> <p><i>Equity Smart Beta and Factor Investing for Practitioners</i> offers a hands-on guide to the popular investment opportunities of smart beta, which is one of the fastest growing areas within the global equity asset class. This well-balanced book is written in accessible and understandable terms and contains an in-depth manual filled with analytical information and new ideas.</p> <p>The authors—noted experts in the field—include a definition of smart beta investing and detail its history. They also explore the distinguishing characteristics of smart beta strategies, offer an overview of factor investing, and reveal the implementation of smart beta approaches. Comprehensive in scope, the book contains helpful examples of applications, real-life illustrative case studies, and contributions from leading and respected practitioners that explain how they approach smart beta investing.  This important book:</p> <ul> <li>Contains an in-depth exploration of smart beta investing</li> <li>Includes the information written in clear and accessible language</li> <li>Presents helpful case studies, illustrative examples, and contributions from leading and respected experts</li> <li>Offers a must have resource coauthored by the Head of Goldman Sachs’ equity smart beta business</li> </ul> <p>Written for investors who want to tap into the opportunities that smart beta offers, <i>Equity Smart Beta and Factor Investing for Practitioners</i> is the comprehensive resource for learning how to create more efficient overall equity portfolios. </p>
<p>Acknowledgments xiii</p> <p>Disclaimer xv</p> <p>Introduction 1</p> <p><b>Part I Overview of Equity Smart Beta Space</b></p> <p><b>Chapter 1 Evolution and Composition of the Equity Smart Beta Space 11</b></p> <p>I. Introduction 12</p> <p>II. Evolution of Equity Smart Beta 13</p> <p>III. Desired Characteristics of Smart Beta Strategies 19</p> <p>IV. Composition and Definition of Equity Smart Beta 21</p> <p>V. Typical Investor Questions 21</p> <p>VI. Conclusion 30</p> <p><b>Part II Equity Common Factors and Factor Investing</b></p> <p><b>Chapter 2 An Overview of Equity Common Factors and Factor Investing 35</b></p> <p>I. Introduction: What Are Equity Common Factors? 36</p> <p>II. Evolution of Equity Common Factors and Factor</p> <p>Investing 37</p> <p>III. Typical Investor Questions 49</p> <p>IV. Conclusion 53</p> <p><b>Chapter 3 Explaining Smart Beta Factor Return Premia 55</b></p> <p>I. Introduction 56</p> <p>II. Data Mining 57</p> <p>III. Risk-Based Explanations 58</p> <p>IV. Behavioral Explanations 59</p> <p>V. Structural Explanations 62</p> <p>VI. Typical Investor Questions 63</p> <p>VII. Conclusion 68</p> <p><b>Part III Capturing Smart Beta Factors</b></p> <p><b>Chapter 4 Weighting Schemes 71</b></p> <p>I. Introduction 73</p> <p>II. Weighting Schemes Used to Capture Factor Returns 73</p> <p>III. Assessing the Investment Performance and Efficiency of Weighting Schemes Used to Capture Factor Returns 82</p> <p>IV. Typical Investor Questions 96</p> <p>V. Conclusion 101</p> <p><b>Chapter 5 Factor Specifications 109</b></p> <p>I. Introduction 110</p> <p>II. Value 111</p> <p>III. Momentum 114</p> <p>IV. Low Volatility 115</p> <p>V. Quality 116</p> <p>VI. Typical Investor Questions 119</p> <p>VII. Conclusion 122</p> <p><b>Chapter 6 Active Risk and Return Decomposition of Smart Beta and Active Strategies 125</b></p> <p>I. Introduction 127</p> <p>II. Risk Decomposition of Smart Beta Strategies 127</p> <p>III. Risk Decomposition of Active Strategies 134</p> <p>IV. Typical Investor Questions 142</p> <p>V. Conclusion 148</p> <p><b>Part IV Performance Characteristics of Smart Beta Factor Strategies</b></p> <p><b>Chapter 7 Performance Characteristics of Individual Smart Beta Factors 151</b></p> <p>I. Introduction 152</p> <p>II. After-Cost Performance: Accounting for Implementation Costs 154</p> <p>III. After-Cost Performance Characteristics 158</p> <p>IV. Typical Investor Questions 168</p> <p>V. Conclusion 171</p> <p><b>Chapter 8 Performance Characteristics of Factor Diversification Strategies 173</b></p> <p>I. Introduction 175</p> <p>II. Active Return Correlations 175</p> <p>III. Performance Characteristics of Factor Diversification Strategies 179</p> <p>IV. Constructing Diversification Strategies: The Portfolio Blending versus Signal Blending Debate 197</p> <p>V. Typical Investor Questions 202</p> <p>VI. Conclusion 209</p> <p><b>Chapter 9 The Low-Volatility Anomaly 211<br /></b><i>Roger G. Clarke, Research Consultant, Analytic Investors<br /></i><i>Harindra de Silva, Portfolio Manager, Analytic Investors/Wells Fargo Asset Management<br /></i><i>Steven Thorley, H. Taylor Peery Professor of Finance, Marriott School of Business, Brigham, Young University</i></p> <p>I. Introduction 211</p> <p>II. Historical Manifestation of the Low-Volatility Factor 212</p> <p>III. How Is “Low Volatility” Defined? 214</p> <p>IV. Secondary Factors of Low-Beta Portfolios 218</p> <p>V. Building a Low-Volatility Portfolio 224</p> <p>VI. Publicly Available Low-Volatility ETFs 226</p> <p>VII. Summary and Conclusion 226</p> <p><b>Part V Smart Beta Implementation</b></p> <p><b>Chapter 10 Structuring Better Equity Portfolios: Combining Smart Beta with Smart Alpha 231</b></p> <p>I. Introduction 232</p> <p>II. Current Portfolio Structuring Practices 233</p> <p>III. Portfolio Structuring: A Suggested Framework 235</p> <p>IV. Typical Investor Questions 246</p> <p>V. Conclusion 258</p> <p><b>Chapter 11 Incorporating ESG with Smart Beta 261</b></p> <p>I. Introduction 262</p> <p>II. ESG Data 263</p> <p>III. Incorporating ESG Strategies 264</p> <p>IV. Incorporating ESG with Smart Beta 273</p> <p>V. Typical Investor Questions 277</p> <p>VI. Conclusion 281</p> <p><b>Chapter 12 An Alternative to Hedge Fund Investing: A Risk-Based Approach 283</b></p> <p>I. Introduction 283</p> <p>II. Benefits of a Diversified Portfolio of Hedge Funds 286</p> <p>III. Systematic Drivers of Hedge Fund Performance 296</p> <p>IV. Liquid Tracking Portfolio Simulated Performance 301</p> <p>V. Developments in the Hedge Fund Industry 309</p> <p>VI. Conclusion 314</p> <p><b>Part VI Asset Owner Perspectives</b></p> <p><b>Chapter 13 Implementing Smart Beta at CalPERS, a Conversation with Steve Carden 319<br /></b><i>Investment Director, Global Equities, California Public Employees Retirement System</i></p> <p><b>Chapter 14 A Pension Fund’s Journey to Factor Investing: A Case Study 331<br /></b><i>Hans de Ruiter, Chief Investment Offi cer, Stichting Pensioenfonds TNO; Associate Professor, Vrije Universiteit Amsterdam</i></p> <p>I. Introduction 331</p> <p>II. The Case for Passive Market Cap–Weighted Strategies 332</p> <p>III. Are Smart Beta Strategies the Better Alternative? 333</p> <p>IV. Practical Considerations 337</p> <p>V. Conclusion 341</p> <p><b>Chapter 15 Using Smart Beta for Efficient Portfolio Management 343<br /></b><i>Ilian Dimitrov, Head of Growth Assets, Oak Pension Asset Management Limited; Vice President, Investments, Barclays Bank UK Retirement Fund</i></p> <p>I. Introduction 343</p> <p>II. Motivation and Strategy Selection 344</p> <p>III. Challenges 344</p> <p>IV. Product Selection 345</p> <p>V. Smart Beta Allocation 347</p> <p>VI. Governance, Monitoring, and Performance Benchmarking 348</p> <p>VII. Conclusion 348</p> <p><b>Part VII Consultant Perspectives</b></p> <p><b>Chapter 16 Smart Beta from an Asset Owner’s Perspective 351<br /></b><i>James Price, Director, Willis Towers Watson<br /></i><i>Phil Tindall, Senior Director, Willis Towers Watson</i></p> <p>I. The Smart Beta Revolution or Evolution? 351</p> <p>II. Smart Beta from the Asset Owner Perspective 356</p> <p>III. Asset Owners Face New Challenges When Using Smart Beta Strategies 364</p> <p>IV. Future Developments 367</p> <p>V. Concluding Thoughts 371</p> <p><b>Chapter 17 Smart Beta: The Space Between Alpha and Beta 373<br /></b><i>Andrew Junkin, President, Wilshire Consulting<br /></i><i>Steven Foresti, Chief Investment Offi cer, Wilshire Consulting<br /></i><i>Michael Rush, Vice President, Wilshire Consulting</i></p> <p>I. Factors: The Building Blocks of Portfolios 375</p> <p>II. Alpha or Beta? 375</p> <p>III. Equity Factor Investing: An Example 377</p> <p>IV. Performance of Key Equity Factors 377</p> <p>V. Implementation of Smart Beta 379</p> <p>VI. Smart Beta Case Study: A Potential Complement to Traditional Active Management 383</p> <p>VII. The Pros and Cons of Smart Beta 385</p> <p>VIII. Conclusion 387</p> <p><b>Part VIII Retail Perspectives </b></p> <p><b>Chapter 18 Smart Beta Investing for the Masses: The Case for a Retail Offering 395<br /></b><i>Lisa L. Huang, Head of Artifi cial Intelligence Investment Management and Planning, Fidelity Investments<br /></i><i>Petter N. Kolm, Director of the Mathematics in Finance Master’s </i><i>Program and Clinical Professor, Courant Institute of Mathematical Sciences, New York University</i></p> <p>I. Introduction to Factor Investing and Smart Beta 396</p> <p>II. Why Provide a Smart Beta Strategy in Today’s Retail Market? 399</p> <p>III. Challenges in Developing a Smart Beta Portfolio Strategy for Retail Investors 401</p> <p>IV. Implementing a Smart Beta Portfolio Strategy as a Fiduciary Advisor 402</p> <p>V. A Look into the Future 407</p> <p>VI. Conclusion 409</p> <p><b>Chapter 19 Positioning Smart Beta with Retail Investors, a Conversation with Jerry Chafkin 411<br /></b><i>Chief Investment Officer, AssetMark</i></p> <p><b>Part IX Concluding Remarks</b></p> <p><b>Chapter 20 Addressing Potential Skepticism Regarding Smart Beta 425</b></p> <p>I. Skepticism Regarding Factor Existence 425</p> <p>II. Skepticism Regarding Implementation 426</p> <p>III. Skepticism Regarding Factor Persistence 429</p> <p>IV. Conclusion 430</p> <p><b>Chapter 21 Conclusion 431</b></p> <p>About the Authors 433</p> <p>Bibliography 447</p> <p>Additional Disclaimers 459</p> <p>Index 463</p>
<p><b>KHALID (Kal) GHAYUR, CFA, FSIP,</b> is Managing Director, Head of ActiveBeta Equity Strategies, Goldman Sachs Asset Management. He oversees his team's customized, factor-based equity portfolios. Prior to joining GSAM, Kal was the Managing Partner and Chief Investment Officer for Westpeak Global Advisors, a pioneer in the smart beta space. <p><b>RONAN G. HEANEY</b> is Vice President, Head of ActiveBeta Equity Research, Goldman Sachs Asset Management. He leads investment research activities, including improving quantitative investment models and portfolio construction methodologies and identifying and testing new model components and implementation techniques. <p><b>STEPHEN C. PLATT, CFA,</b> is Vice President, Head of ActiveBeta Equity Portfolio Management, Goldman Sachs Asset Management. He is responsible for portfolio management, including portfolio construction and risk management of global developed and emerging market equity portfolios and custom indexes.
<p><b>C</b>ombining the benefits of passive investing with the advantages of active investing strategies, equity smart beta and factor investing is an increasingly discussed and debated topic within the investments industry. When properly implemented, smart beta reduces risk or increases diversification at a cost lower than traditional active management and marginally higher than straight index investing, resulting in an optimally diversified portfolio. A recent survey of asset owners, representing over $3.5 trillion in assets worldwide, found that 77% of respondents have already evaluated or implemented smart beta strategies, or are planning to do so. Accordingly, smart beta adoption rates increased from 26% in 2015 to 48% in 2018. The wide range and growing variety of smart beta products available in the marketplace can prove to be overwhelming for investors often struggling with how to analyze and select such products. Factor specifications, weighting schemes, and methodologies used to control turnover, diversification, or capacity are just some of the factors that influence variances in smart beta offerings. <p><i>Equity Smart Beta and Factor Investing for Practitioners</i> satisfies the need for straightforward, accurate investor education on this important innovation in the field of investments. Written from the practitioner's perspective, this book helps readers understand the theoretical underpinnings of smart beta investing, analyze and select smart beta strategies, structure more efficient portfolios, and gain insights from other practitioners who have successfully implemented smart beta investing in their portfolios. This comprehensive book on smart beta investing: <ul> <li>Reviews the evolution, definition, and composition of the equity smart beta space and identifies desirable characteristics of smart beta offerings</li> <li>Discusses the origins and theory of factor investing and risk-based, behavioral, and structural explanations of why factor premia exist</li> <li>Offers a framework for understanding and analyzing various weighting schemes used to capture smart beta factor returns</li> <li>Explains performance characteristics of smart beta factor strategies</li> <li>Provides examples of factor investing beyond equities, smart beta implementation, portfolio structuring, and multistrategy, multimanager portfolios</li> </ul> <p><i>Equity Smart Beta and Factor Investing for Practitioners</i> will prove to be a valuable, hands-on manual for both investors and managers seeking to set appropriate expectations and maintain discipline during difficult times, improve the ability to achieve long-term objectives, structure more efficient overall equity portfolios, and achieve better investment outcomes.
<p><b>The comprehensive guide to the rapidly growing investment opportunities of smart beta investing</b> <p>Smart beta investing is the fastest growing area within the equity asset class. Changing the way investors structure their overall equity portfolios, smart beta strategies emphasize the use of alternative weighting schemes to traditional market capitalization-based indexes. This important innovation is highly popular within the investments industry and has prompted the launch of numerous smart beta products. <i>Equity Smart Beta and Factor Investing for Practitioners</i> is the first full-length book focused on this exciting array of offerings. <p>This practical, hands-on guide shares the practitioner's perspective on smart beta investing, combining straightforward readability with in-depth content and cutting-edge ideas. Drawing from their experiences leading the Goldman Sachs ActiveBeta team, the authors share real-life case studies, explain factor investing, define and detail the history of smart beta, and examine smart beta characteristics, strategies, and implementation methods. <i>Equity Smart Beta and Factor Investing for Practitioners</i> also features contributions from leading industry experts, including a variety of asset owners, asset managers, and consultants. Covering everything from explaining return premia to structuring better equity portfolios, this book will prove to be a valuable resource for anyone engaged in smart beta and factor investing.

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