Index Fund Management: A Practical Guide to Smart Beta, Factor Investing, and Risk Premia

ISBN-13: 9783030193997 / Angielski / Twarda / 2019 / 248 str.

Fadi Zaher

Opis

This book brings simplicity to passive investing, smart beta, and factor investing, which is the fastest growing type of investment in the asset management industry. The subject has a strong academic foundation but often taught and presented in a quite complex and unorganized way.In recent years, index and factor investing solutions have been bestsellers. But factor investing success is not a foregone conclusion, and there are plenty of quirks and misprints in the literature. Do investors need a novel approach? The book provides answers to some of these questions in an open and objective fashion.Index fund management is increasingly taught in finance courses at universities. For market practitioners including trustees and investors, this book facilitates an increased understanding of how to invest in index and smart beta strategies, how to implement them, and what to be aware of with concrete and practical real-world examples.

Spis treści

1 Introduction:  What we talk about in factor investing

PART I

2. Stepping up to factor investing

2.1. History of significant advances in indices and indexed funds

2.2. Growth and adaptation of factor strategies

2.3. The taxonomy of risks and returns

2.4. Factor investing versus traditional index and active

2.5. The misconception of factor investing in the press

2.6. Consideration when looking at factor investing

2.7. Concluding remarks

3. Architecture and art of indexation

3.1. Why index architecture matters

3.2. Representativeness of the index strategy

3.3. Modularity of an index

3.4. Availability: the amount of stocks and bonds outstanding

3.5. Stock and bond weightings

3.5.1. Market value weighting

3.5.2. Equal weighting

3.5.3. Price weighting

3.5.4. Outcome-oriented weighting: Tilting and optimisation

3.6. Index maintenance and operations

3.7. Replication and management of index funds

3.7.1. Trading strategies

3.7.2. Securities lending

3.7.3. Cash management

3.8. Crowding risk of index funds

3.9. The capacity of index funds

3.10. Concluding remarks

4 Equity Factor Investing: Value Stocks

4.1 Schools of value investing

4.2 The value and growth debate

4.3 Intrinsic value

4.4 Systematic screening approaches

4.4.1 Benjamin Graham screen

4.4.2 Price-to-book screen

4.4.3 Price-to-Earning screen

4.4.4 Price-to-sales ratio

4.4.5 Comparison and combination of screens

4.4.6 What constitutes good screen criteria?

4.5 Behavioural drivers of value factor

4.6 Market structure and reward for risk

4.7 Considerations for value investing

4.8 Concluding remarks

5 Equity Factor Investing: High Quality

5.1 Investment horizon for quality

5.2 Quality factor screens

5.2.1 Profitability screen

5.2.2 Asset growth and investment screen

5.2.3 Leverage screen

5.2.4 Earning accruals screen

5.2.5 Corporate governance screen

5.2.6 Combined quality screens among practitioners

5.3 Drivers of the quality premium

5.4 Quality and valuation of stocks

5.5 Consideration for quality strategies

5.6 Concluding remarks

6 Equity Factor Investing: Low Risk

6.1 Why considering low volatility factor investing?

6.2 Low-risk factor approaches and construction

6.3 Common low volatility factor indices

6.4 Behavioural drivers of the factor premium

6.5 Market structures driving the factor premium

6.6 Considerations when implementing low volatility strategies

6.7 Low volatility in asset allocation

6.8 Concluding remarks

7 Equity Factor Investing: Momentum

7.1 Evolution of momentum investing

7.2 Rules-based momentum index strategies

7.2.1 Cross-sectional momentum strategies

7.2.2 Time series momentum strategies

7.3 Market-based index strategies

7.4 Behavioural drivers of momentum premium

7.4.1 Herding behaviour

7.4.2 Representativeness and Confirmation bias

7.5 The reward for risk and market structures

7.6 Consideration for momentum strategies

7.7 Concluding remarks

8 Equity Factor Investing: Size

8.1 Defining the size factor

8.2 Construction of size-based index strategy

8.3 The existence of the size premium

8.4 Risk-based explanation of the size premium

8.5 Non-risk based explanation

8.5.1 The January effect

8.5.2 Inefficient pricing

8.5.3 Attention, coverage and transparency

8.5.4 Behavioural drivers of the size factor

8.6 Criticism of the size premium

8.7 Considerations when investing in small size

8.8 Concluding remarks

9 Equity Multi-Factor Investing

9.1 Factor cyclicality and diversification

9.2 Blending the factors into multi-factor strategy

9.2.1 The top-down approach

9.2.2 The bottom-up approach

9.3 So which approach is best?

9.4 Multi-factor indices in the market

9.5 Timing the factors

9.5.1 Factor sensitivities and factor dynamics

9.6 Considerations when timing the factors

9.7 Multi-factor portfolio analysis

9.7.1 Portfolio return-based style analysis

9.7.2 Security-based style analysis

Concluding remarks

10 Fixed Income Factor Investing

10.1 Why factor investing in fixed income?

10.2 Drivers of bond risk and return

10.3 Misconception when thinking of bond factors

10.4 What are the factors in bonds?

10.5 Government bond style factors

10.5.1 Size factor for government bonds

10.5.2 Quality factor for government bonds

10.5.3 Value factor for government bonds

10.5.4 Momentum factor for government bonds

10.5.5 Low volatility factor for government bonds

10.6 Corporate bond style factors

10.6.1 Quality factor for corporate bonds

10.6.2 Value factor for corporate bonds

10.6.3 Momentum factor for corporate bonds

10.6.4 Size factor in corporate bonds

10.6.5 Low volatility factor for corporate bonds

10.7 Multi-factors strategies in corporate bonds

10.8 Considerations when building bond factors

10.9 Concluding remarks

11 Multi-Asset Alternative Risk Premia

11.1 Why are we thinking of ARP?

11.2 Fund manager types in ARP

11.3 Taxonomy of ARP strategies

11.4 Carry premia across assets

11.4.1 Currency carry premium

11.4.2 The commodity carry premium

11.4.3 The bond carry premium

11.4.4 Other carry premia

11.5 Value ARP strategies

11.5.1 Currency value premium

11.5.2 Commodities value premium

11.5.3 Fixed income and equities ARP value premia

11.6 Momentum and trend-following strategies

11.7 Portfolio construction of ARP strategies

11.8 Access to ARP strategies

11.9 A consideration when selecting ARP

11.10 Concluding remarks

O autorze

Fadi Zaher is responsible for LGIM’s Index Solutions. His role includes defining and leading LGIM’s Index Solutions across ESG, factor based investing and tailored index strategies. Prior to that, he was Head of Fixed Income Strategy and Research at Barclays Wealth and Investment Management, Head of Bonds and Currencies at Kleinwort Benson, and held other senior positions at various financial institutions in the past 12 years. In his earlier career, Fadi worked at the European Central Bank and was previously a researcher and senior lecturer of finance and econometrics in Sweden. Fadi graduated from Lund University and holds a PhD in financial economics and MSc in economics.