In the latest edition of Risk & Reward we present the Natural Language Processing (NLP) – a truly digital approach to discovering innovative companies based on automated analysis of millions of text files. Other articles in this issue deal with factor investing, our time-tested method of investment selection. We analyze the recent weakness of value stocks and examine what has happened to the value effect, and discuss the use of less structured data in factor investing. Finally, we consider the macro factors that factor investors can use to position their portfolios for likely macroeconomic developments as an effective complement to style preferences.
Marty Flanagan, President and CEO of Invesco Ltd.Demographic and social change, the need for more sustainability and technological evolution – these three megatrends are shaping our world, and Covid-19 is likely to accelerate these trends further. In this issue of Risk & Reward, we discuss the impact of these forces and of the digital revolution on the world – and on asset management in particular.
The past decades have seen significant innovations and lifechanging progress. Together with issues like sustainability challenges and the aging population, this is likely to lead to even more and faster innovation. We discuss these developments and their significance for the fund management industry.
The world will continue to change at a rapid pace, driven by megatrends. We show how a Natural Language Processing (NLP) algorithm applied to millions of news datasets can help identify businesses that are likely to benefit from these changes.
The validity of value factors derived from various price multiples has been called into question amid their prolonged underperformance. To understand the value effect, i.e. the long-term excess return of value stocks over glamour stocks, we explore the links between value, profitability and EPS growth.
Recent research suggests that traditional factor returns are being arbitraged away. This is where alternative data comes into play: less-well known information, often coming with higher barriers to access, holds great potential for investors and asset managers.
Style factors are useful in diversifying a traditional asset allocation. But as many investors are concerned with shocks in macroeconomic variables like growth and inflation, they may wish to understand and position multi-asset multi-factor allocations through a relevant macro factor lens.
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.
Data as at 30.09.2020, 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.
