When taking a factor-based view of their holdings, investors may find significant unintended factor over- or underweights in their portfolio.

Smart beta ETFs give investors the ability to reduce or enhance these exposure tilts without disrupting current asset allocations.

FACTOR-BASED ANALYSIS ENABLES DEEPER PORTFOLIO INSIGHTS

Figure 1: Net factor exposure
vs. benchmark
Figure 2: Portfolio factor attribution

For illustrative purposes only.
1. Includes management fees.

Institutional investors are increasingly concerned with ways to mitigate extreme losses, or so-called left-tail risk.

MSCI Minimum Volatility indexes have exhibited superior realised CVaRs relative to their market-cap weighted peers.

For investors seeking to manage returns in volatile markets, minimum volatility ETFs can be simple, cost-effective and efficient vehicles to help mitigate portfolio left-tail risk.

MANAGE RETURNS IN VOLATILE MARKETS

Improvement in CVaR:MSCI Standard vs. Minimum Volatility Indexes1

For illustrative purposes only.
1. BlackRock as of 31 January 2017

As a complement or alternative to traditional market-cap weighted exposure, single factors ETFs can serve as a flexible core allocation, offset risk of other strategies or enhance pre-existing factor exposure.

Single factor ETFs can also serve as tools to implement tactical factor tilts. When certain risk premia are believed to be in favour, investors can quickly and easily express those views by tilting toward specific factors in a bid to generate alpha.

SINGLE FACTOR ETFs CAN BE USED FOR STRATEGIC AND TACTICAL TILTS

 

For illustrative purposes