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Implementation

Implementation barriers are falling away

Barriers to adoption of factor investing, which have been high in previous years, are falling away rapidly.

Bar chart graph showing the decrease in implementation barriers from 2018 to 2016.

- Included in Study as Figure 39.

- Sample 123, 137 (style: institutional, wholesale), 41, 44 (macro: institutional, wholesale)

  • The most significant barrier is (and has always been) internal capability.
  • Unsurprisingly, barriers are highest for the new factor investor, but they do fall away as experience is gained and capability developed.
  • ETFs and other exchange-traded products are preferred for implementation (including by institutions), and investors often prefer a single or handful of asset manager relationships.
Important Information
Factor investing is an investment strategy in which securities are chosen based on certain characteristics and attributes that may explain differences in returns. There can be no assurance that performance will be enhanced or risk will be reduced for strategies that seek to provide exposure to certain factors. Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. Factor investing may underperform cap-weighted benchmarks and increase portfolio risk. Past performance is not a guarantee of future results. Sample and methodology The fieldwork for this study was conducted by NMG Consulting’s (NMG) strategy consulting practice. Invesco chose to engage a specialist independent firm to ensure high quality objective results. Key components of the methodology include: A focus on the key decision makers within institutional investors, asset consultants, and private banks, conducting interviews using experienced consultants and offering market insights
  • A focus on the key decision makers within institutional investors, asset consultants, and private banks, conducting interviews using experienced consultants and offering market insights
  • In-depth (typically one hour) face-to-face interviews using a structured questionnaire to ensure quantitative as well as qualitative analytics were collected
  • Analysis capturing investment preferences as well as actual investment allocations with a bias toward actual allocations over stated preferences
  • Results interpreted by NMG's strategy team with relevant consulting experience in the global asset management sector
In 2018, the third year of the study, we conducted interviews with 300 different asset consultants, insurers, pension funds, sovereign investors and private banks globally (up from 108 in 2017). In this year's study, all respondents were 'factor users', defined as any respondent investing in a factor product across their entire portfolio. We deliberately targeted a mix of investor profiles across multiple markets. The breakdown of the 2018 interview sample by investor segment and geographic region is displayed in figures 58 and 59. Invesco is not affiliated with NMG Consulting. Survey participants experience may not be representative of others, nor does it guarantee the future performance or success of any product. The opinions expressed are those of NMG and are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals. There may be material differences in the investment goals, liquidity needs, and investment horizons of individual and institutional investors.

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