Factors such as size, value, and growth have played a part in asset allocation decisions for decades. With the advent of factor indexing, passive investors gained access to a broader range of exposures. Today, investors can access factors both individually and in combination through a range of ETFs, tapping into a world of sophisticated strategies that were once available only via active management.


Growth of Factor Investing

Global Assets in Factor ETFs (USD Bill.)


Intro


Why Factors?

  • Unique Risk Premia

    Over the long term, factors can offer their own return beyond what the market provides.

  • Diversification

    Because historically, factors have exhibited relatively low correlations, they can be helpful in diversifying a portfolio.

  • Risk Management

    Factor strategies can help investors achieve specific goals, such as risk reduction over the long-term through diversification or by isolating distinct market characteristics.


The Factor Spectrum

Our single-factor indices measure exposure to individual non-market risk factors. Get the latest factor dashboard or explore the full range of factor indices here.
  • Dividend Yield

    Stocks having higher than average dividend yields, accounting for dividend quality.

  • Enhanced Value

    Stocks with attractive valuations based on value scores calculated using three fundamental measures: book value-to-price, earnings-to-price, and sales-to-price.

  • Low Volatility

    Stocks with the lowest relative volatility over a defined time period.

  • Momentum

    Stocks exhibiting the greatest persistence in their relative risk-adjusted performance.

  • Quality

    Stocks with the highest relative quality based on return on equity, accruals ratio, and financial leverage.

  • Size / Equal Weight

    Accounts for stock size based on market cap (e.g., large-caps vs. small-caps), or equal weighting, which tilts the index in favor of smaller-sized companies.


Styles Tailored to Your Needs

S&P Style Indices

S&P Style Indices provide broad exposure and are market-cap weighted. This approach makes them relevant benchmarks for evaluating the skill of active managers, and suitable for those seeking traditional “buy-and-hold” index-linked investments with a tilt toward a particular style.

S&P Pure Style Indices

S&P Pure Style Indices have a stricter definition of growth and value, resulting in more-concentrated style exposures for market participants seeking precise tools. Unlike the standard style indices, they are style-score weighted, and there are no overlapping securities between growth and value.

S&P Enhanced Value Indices

S&P Enhanced Value Indices measure top-tier stocks by value score, and account for both market cap and value score in their weighting.


Factor Effectiveness

In both developed and emerging markets around the world, most factors have historically delivered excess return relative to their benchmarks, as indicated by their 15-year information ratios. Find out how factor strategies perform in Australia, China, and Hong Kong, and learn how low volatility performs around the world.


Factor  Effectiveness

Source: S&P Dow Jones Indices and/or its affiliates. Data as of June 30, 2020. Total return versions of the indices are used. Charts are provided for illustrative purposes. Past performance is not an indication or guarantee of future results. These charts may reflect hypothetical historical performance. Please see the Performance Disclosure for more information about index returns, including hypothetical performance.


Multi-Factor Indices: Combining Factors

While powerful individually, factors also can be used in combination depending on your market outlook and investment objectives. Some common factor combinations include:

Multi-Factor Indices: Combining Factors


Benefits of Multi-factor Indices

Historically, the five core factors have generally exhibited weak correlations. Combining such factors can improve long-term performance and generate more stable excess returns. Because investors aren’t required to make decisions about when to shift among factors, multifactor approaches reduce the risk associated with timing factor exposures.

Benefits of Multi-factor Indices

Source: S&P Dow Jones Indices and/or its affiliates. Data as of June 30, 2020. Index performance based on USD total returns. Charts are provided for illustrative purposes. Past performance is not an indication or guarantee of future results. These charts may reflect hypothetical historical performance. Please see the Performance Disclosure for more information about index returns, including hypothetical performance.


A History of Factor Innovation

A pioneer of factor indexing, we launched our first growth and value indices in 1992 and remain a leading innovator today.

A History of Factor Innovation


Research & Insights

  • S&P 500 Low Volatility Index: Five Decades of History

    Take a closer look at how the low volatility anomaly has persisted over the past 50 years.

    Read now
  • The Merits and Methods of Multi-Factor Investing

    Are multiple factors better than one?

    Read now
  • Distinguishing Style From Pure Style

    The S&P Style Indices and S&P Pure Style Indices have distinct risk/return characteristics due to their methodological differences.

    Read now
  • Adapt to Changing Market Conditions: S&P Economic Cycle Factor Rotator Index

    Look inside a dynamic factor rotation strategy designed to time factors in different phases of the business cycle.

    Watch now
  • Is the Low Volatility Anomaly Universal?

    Find out if one of the greatest anomalies in finance holds up across regions.

    Read now

Factor Tools at Your Fingertips

Factor Tools at Your Fingertips

Factor Allocator is an innovative web-based information tool that allows users to analyze, build, deconstruct, and replicate simulated portfolios based on S&P Factor Indices.

Visit factorallocator.com/spdji