Investing with the X factor in global stocks

The multi-factor strategies of Rosenberg Equities offer a diversified and sustainable exposure to global equity markets in a cost-effective manner.

In a nutshell, Rosenberg Equities, the specialist in quantitative share management of AXA IM with EUR 19 billion in its portfolio, offers two multi-factor strategies: Sustainable Equity and Multi-Factor. The core of the Sustainable Equity strategy consists of the factors low volatility and quality. The combination of these factors has the objective of protecting capital in declining markets and yielding returns in bull markets in order to perform stably under all market conditions. The Multi-Factor strategy is, with the quality, value and momentum factors, meant to do better than the market under almost all conditions.

The investment process at Rosenberg Equities is based on a detailed analysis of the key data of 20,000 businesses worldwide. Advanced technologies, e.g. neural networks, big data and artificial intelligence, are used. As a consequence of this quantitative approach decisions are reached objectively and rationally. The use of factors results in improved risk-return ratios, says Gideon Smith, Europe Chief Investment Officer at Rosenberg Equities. “To me, factor investing is fundamental investing with a different label. For instance, with the value factor we mostly look at the level of future income of a business. With quality we pay attention to the sustainability of future income streams. Low volatility regards the risks that are associated with income streams. With momentum the focus is placed on the profit growth of a business.”

Risk control

When composing the portfolios, Rosenberg Equities pays attention to, apart from turnover, transaction costs and liquidity, the unexpected risks that factor investing may bring about. Continuous monitoring and risk control form an integral part of the approach, says Smith. The quantitative model weighs factors dynamically, conditional upon the market conditions. Because sometimes momentum has the X factor, and then quality again. “We want positive exposure to factors that we deem to be relevant, but the weighting changes continuously, for instance if valuations rose too rapidly due to speculation, as in recent years in case of low volatility. We try to identify these risks and control them in such manner that we are exposed to volatility as little as possible. In addition, we keep a very close eye on the mutual correlations between factors.”

The result is a portfolio that aims for a potentially sustainable long-term return of which the volatility is lower than that of a share index. Factor investing thrives in the long term but Smith does indeed realise that nowadays investors easily run out of patience. “Everyone refers to himself as a long-term investor but everyone wants to know why the return was disappointing last week. With the help of factors a stable portfolio can be composed that should do well under most market conditions. There will be periods when factors fall out of grace. But because the bulk of the return originates from the exposure to factors we can properly explain a potential underperformance”, says Smith.

The factor strategies of Rosenberg Equities rely on ESG criteria. Smith does not consider sustainability as a factor but as a resource to reduce the risks in the long term and to improve factors. “We look at sustainability in a basic manner. ESG provides economic information about a business, and consequently says something about the potential of quality, value or momentum. Diversity, part of the S of ESG, is an indicator of the quality of a business. If the top of a business has been diversified then better decisions are reached that shall result in more stable profits. With quality we also pay attention to the CO2 footprint of a business. The higher this is the bigger the chance that the business is burdened with additional costs in the future.”

This article if offered by Investment Officer. To access Investment Officer's articles, subscribe to the platform here.


Discover AXA WF Global Factors - Sustainable Equity fund here.

This article is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIFID Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. References to league tables and awards are not an indicator of future performance or places in league tables or awards and should not be construed as an endorsement of any AXA IM company or their products or services. Please refer to the websites of the sponsors/issuers for information regarding the criteria on which the awards/ratings are based. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment. Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Before making an investment, investors should read the relevant Prospectus and the Key Investor Information Document (KIID) / scheme documents, which provide full product details including investment charges and risks. The information contained herein is not a substitute for those documents or for professional external advice. Those documents are available free of charge from AXA IM Benelux SA/NV, Place du Trône 1 – 1000 Brussels, and on the website
In Belgium, this document is intended for professional clients only, as defined by local laws and the MiFID directive, and has been edited by AXA IM Benelux S.A., a company incorporated under the laws of Belgium, having its registered office located at Place du Trône, 1, B-1000 Brussels, registered with the Brussels Trade and Companies Register under number 604.173.


© AXA Investment Managers 2019. All rights reserved