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Smart Beta™, a smart solution to harvesting beta from
fixed income and equity markets
 

An issue passive investors have faced for many years is how best to harvest the beta available from financial markets, at a low cost. The most common approach thus far has been to simply track the relevant market capitalisation-weighted index, despite a number of well-documented shortcomings associated with this approach.

For Corporate Bonds, diversifying using market capitalisation weightings seems a strange way to minimise credit risk, given that it dictates a greater investment in the most indebted companies – ultimately, not the best reward for investors.

For Equities, passively invested market cap weighted strategies fail equity investors by clinging to past winners, assuming that the price of a stock is always a fair reflection of its true value and not offering real diversification across names, sizes and sectors.

With these shortcomings in mind, AXA IM has developed its Smart Beta solution, a long-term investment strategy that aims to capture market beta more efficiently, low cost relative to active strategies.
 

AXA IM's Smart Beta™ Credit Strategy

SmartBeta for Credit - Our objectives

  • A low turnover, ‘buy and maintain' approach to credit investing
  • Well diversified (not market capitalisation weighted)
  • Target low volatility (relative to the standard corporate bond universe)
  • Focus on maximising yield through ‘smart selecting' the best issuers and issues
  • Target low cost (a relentless focus on minimising fees/transaction costs, thus maximising returns for investors).

 

Why invest in AXA IM's SmartBeta Credit strategy?

  • 20 years' experience as a successful ‘buy and maintain' investor in the fixed income space
  • Size and scale: €340 billion in "Buy and Maintain" Fixed Income strategies globally, with €240 billion invested in corporate credit globally
  • Substantial global credit research resources: 39 dedicated Fundamental Credit Analysts and a global team of 40 Credit Portfolio Managers Analysts (PMAs) based in every major region (Europe, UK, US and Asia)
  • World class dealing capabilities: a centralised dealing desk, with traders specialised by market, instrument and region, adds vital value by minimising transaction cost ‘leakage'
  • Risk monitoring integrated throughout the investment process: a dedicated Portfolio Engineering Group (PEG) focuses solely on understanding and monitoring portfolio risks.
     

Risks associated with this strategy

  • Market risk and risk of loss of invested capital
  • Risks associated with fixed income securities, including, but not limited to, interest rate risk, credit risk and liquidity risks
  • Risks linked to global investments

 

AXA IM's SmartBeta™ Equity Strategy

SmartBeta for Equity - Our objectives

  • Avoids exposure to poorly compensated equity risk
  • Diversifies intelligently (not market capitalisation weighted)
  • Target low volatility (relative to the standard equity universe)
  • Forward looking, outcome-focused approach
  • Target low cost (relentless focus  on minimising fees/transaction costs, thus maximising returns for investors)
  • Transparent – a sophisticated yet straightforward solution.

Why invest in AXA IM's SmartBeta Equity Strategy?

  • Leverages AXA Rosenberg's proprietary fundamental insight
  • More than 10 years' experience managing global portfolios that look past market capitalisation to target desirable fundamental features
  • Risk monitoring embedded throughout process.

Risks associated with this strategy

  • Market risk and risk of loss of invested capital
  • Equity risks
  • Risks linked to global investments
  • Emerging markets risks
  • Risk linked to Systematic Method and Model

 


Note: all data quoted as at 31/12/2016. AUM data as at 30/09/2016 (latest available)