Aon has partnered with Legal & General Investment Management and Scientific Beta to launch a new customised multi-factor index.
Factor investing, also known as a smart beta investment strategy, is increasingly being used within the DC sector to construct and manage portfolios.
Aon’s customised index is based on research which identified four key factors which have the potential to offer long-term outperformance: value, low volatility, quality and momentum.
Its research with the Cass Business School highlighted the potential efficiency gains from investing in indices that are weighted according to these alternative factors, rather than traditional market cap measures.
This new multi-factor index, which is available to both Aon’s advisory and delegated clients, was launched in August 2018 and already has over £1bn of assets managed against it.
Aon senior investment consultant Andrew Peach says: “Schemes are increasingly looking towards factor investing as a way to diversify and improve the investment efficiency of their equity portfolios. After extensive research, we felt there was a need to design a solution that would both reflect our empirical findings and be constructed based on our best ideas and beliefs.
“We looked for providers who could help us implement a product that focuses on the four core factors which our research indicated have the potential for long-term return enhancement and/or risk reduction. This customised factor index will enable our clients to reap the benefits of factor-based investing at low cost.”
Scientific Beta executive director Akshay Kapoor adds: “As part of an academic institution, we are particularly pleased that there has been a meeting of minds on investment beliefs and research philosophy, and on our shared goal of demystifying smart beta and improving outcomes for investors.”
LGIM’s head of index and multi-asset distribution Adam Willis adds: “Investors are looking for ways to ensure deeper diversification of their investments. This multi-factor index will help to address challenges around the efficiency of equity portfolios.
“This global partnership brings together factor based investing and index expertise from Scientific Beta and Legal & General Investment Management, as well as Aon’s industry experience to provide DB and DC clients with a tailored solution that will meet specific investment objectives.”