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Smart solutions for harvesting beta from fixed income and equity markets

An issue that passive investors have faced for many years is how best to capture efficiently the returns - delivering the yields and growth - available from financial markets, at a low cost. The most common approach thus far has been to simply track the relevant market capitalisation-weighted index, despite a number of well-documented shortcomings associated with this approach.

For Corporate Bonds, diversifying using market capitalisation weightings seems a strange way to minimise credit risk, given that it dictates a greater investment in the most indebted companies – ultimately, not the best reward for investors.

For Equities, passively invested market cap weighted strategies fail equity investors by clinging to past winners, assuming that the price of a stock is always a fair reflection of its true value and not offering real diversification across names, sizes and sectors.

With these shortcomings in mind, AXA IM has developed Efficient Investing solutions for long-term investors. These outcome-driven strategies aim to capture market-like returns more efficiently, in a transparent and low cost manner.

The solutions are designed to enable clients to customise their strategies to meet their desired responsible and impact investing requirements -  by integrating Environmental, Social and Governance factors or directing the outcome towards the dual objectives of achieveing both financial and social returns.

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Blindly tracking indices however
they are constructed can never be optimal: they studiously ignore real-time information and the changing environment. Let's be clear. An investor doesn't want an index. He or she wants a practical asset strategy."

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