An issue that has plagued investors for many years is how to efficiently capture returns from financial markets at a low cost. Until now, a common approach has been to simply track indices.
For equity investors, passive investing (or index tracking) has historically provided low-cost exposure to equity markets, but in doing so exposed investors to the boom and bust of markets, typically allocating capital based purely on past price success. A new generation of indices has attempted to rectify these shortcomings and offered alternative weighting schemes for investors to track based on fundamental metrics or exposure to specific investment characteristics such as low volatility or quality (factor investing). However, these are often one-dimensional in approach, which can lead to unintended consequences such as greater volatility or higher turnover.
For corporate bond investors, diversification through the use of passive index trackers may also not be the most efficient way to minimise cost or credit risk in their portfolios: this typically subjects them to costly rules-based behaviour while simultaneously allocating a disproportionate amount of their capital to the most indebted companies (which are, by definition, the ones most likely to run into difficulty maintaining their coupon payments).
With these shortcomings in mind, AXA IM has developed Efficient Investing solutions for long-term investors. These outcome-driven strategies aim to capture returns more efficiently, in a transparent and low cost manner.
Our Advanced Factor strategies are differentiated from standard indices as they are anchored to company fundamentals. We use proprietary data to understand factors from the bottom up, providing insight into how factors interact and allowing us to blend different factors in ways that add value for our clients. As a long-term investor, we ensure our Advanced factor strategies are implemented thoughtfully and efficiently, aiming to reduce risk and unnecessary costs for our clients.
Our Buy and Maintain strategies aim to provide a more diversified exposure to the fixed income market (across issuers, sectors and countries) and investment in what we believe to be fundamentally strong names, thereby mitigating downside risk and the potential impact of market shocks and defaults on investors, while simultaneously aiming to minimise punitive transaction costs.