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.
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."