Risk & Reward - 1st issue 2021

Risk & Reward Q1 2021

In the post-COVID world, China’s role is widely expected to be far more important than ever before. We believe this is a good reason to analyze what the country has in store for factor investors.

Marty Flanagan. President and CEO of Invesco Ltd.

As with all things new, factor investing in China holds a special appeal. There is abundant opportunity, but there are also notable differences compared to the investment world as we know it. In particular, given the historically rapid pace of change in China, the past may be a less reliable guide to the future than elsewhere. In this issue of Risk & Reward, three of my colleagues describe how they navigate the shifting Chinese investment landscape and show that factor strategies can be effective even when there are structural breaks in the data.

Other articles in this issue address fixed income investing in times of low market yields, real estate sector investing, the merits of estimating the covariance matrix and how to capture multi-asset class factor premia.

Given the complex dynamics of a post-COVID world, we know investors have questions. Can factor strategies help fixed income investors who are seeking higher yields? Which specialty real estate sectors still hold promise when the world as we know it has changed dramatically? Is it worthwhile to forecast covariance – or are old-fashioned return forecasts sufficient? How can retirement savers benefit from a multi-asset class factor approach? This new edition of Risk & Reward offers some answers.

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Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Important Information

  • Data as at 31.12.2020, unless otherwise stated.

    This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.

    Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice and are not to be construed as investment advice.