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iShares ETFs cover a broad range of asset classes, risk profiles and investment outcomes. To understand the appropriateness of this fund for your investment objective, please visit our product webpage.
iShares ETFs cover a broad range of asset classes, risk profiles and investment outcomes. To understand the appropriateness of this fund for your investment objective, please visit our product webpage.
Find out more about iShares MSCI World ex Australia Quality ETF (IQLT)
https://www.blackrock.com/au/individual/products/335480/
This product is likely to be appropriate for a consumer:
Find out more about iShares Edge MSCI Australia Minimum Volatility ETF (MVOL)
https://www.blackrock.com/au/individual/products/284666/
This product is likely to be appropriate for a consumer:
Find out more about iShares MSCI World ex Australia Momentum ETF (IMTM)
https://www.blackrock.com/au/individual/products/335486/
This product is likely to be appropriate for a consumer:
This product is likely to be appropriate for a consumer who is seeking capital growth, using the product for a major allocation of their portfolio or less, with a minimum investment timeframe of 5 years with high to very high risk/return profile.
Factor investing is the strategy of targeting securities with specific characteristics such as value, quality, momentum, size, and minimum volatility. These persistent, well-documented characteristics can help investors understand differences in expected return. They’re tools that professional investors commonly use to seek outperformance.
Factor Investing Explained
Remember how hard it used to be to book a Holiday? We used to spend hours on the phone with a travel agent, then wait days, even weeks for them to work their magic. And that magic came with a high fee because only travel agents had access to the important information needed to book our holiday.
But the information that was once only available to travel agents is now available to anyone – within seconds. Travel sites have made finding the perfect hotel cheaper, faster and more efficient. The same is true for investing. For years, active managers used teams of analysts to find stocks that seemed more likely to outperform. And as an investor, you had to pay a lot in fees to access that thinking.
Many of the traits that active managers have looked for (like buying underpriced, quality stocks) are called factors. And just like you no longer need to call a travel agent to book an affordable, quality vacation, you no longer need to pay large fees for active managers to choose the right stocks based on factors. Now, you can use iShares Factor ETFs to invest in stocks that exhibit the factors that have historically driven portfolio returns. Just as travel sites use simple filters to quickly drill down to the perfect hotel, factor investing provides access to security screens that active managers have used for generations.
Thanks to data and technology, the investment ideas that once took a team of analysts months to research now takes a fraction of the time, at a fraction of the cost.
There are five factors that have historically proven to be drivers of return, and iShares offers ETFs that seek to capture all five:
There’s Quality, which identifies companies with strong and healthy balance sheets.
Minimum Volatility, or stocks that are less volatile than the broad market.
Size, which targets smaller, more nimble companies.
Momentum, which seeks stocks on an upswing.
And value, which targets stocks that are inexpensive relative to their fundamentals.
Factor ETFs deliver the power of time-tested investment screens in a low-cost vehicle, revolutionising access for everyday investors.
Who said finding the right securities for your portfolio was difficult? We say, it’s as easy as booking a hotel.
BlackRock has identified five factors — value, quality, momentum, size, and minimum volatility — that have shown to be resilient across time, markets, asset classes, and have a strong economic rationale.
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For years, professional investors have used factors as a strategic allocation to dial in a portfolio for what's appropriate for their (or their client’s) investment objectives.1 If they want to pursue greater expected returns, they can use factors to gain that exposure. If they want to manage risk, they can also use factors to manage the overall level of expected risk in a portfolio.
Investors can also use factors tactically. Factor investing can be linked to moments in a particular market cycle. New ETFs like iShares MSCI World ex Australia Quality ETF (IQLT) can be used where investors have a preference for companies that have higher quality levels of earnings. Or if there's an event coming up where there's some degree of uncertainty around the outcome, we've seen investors take positions in our iShares Edge MSCI Australia Minimum Volatility ETF (MVOL) in order to manage the overall level of risk in the portfolio without having to exit an asset class.2
Regardless of the use case be it strategic or tactical, we believe that investors prefer style investing with factors due to their systematic nature, their transparency and their cost effectiveness.
The underlying index of each iShares Factor ETF has been researched with Blackrock and MSCI to capture the targeted factor using a combination of company specific metrics.
Where these metrics are inherently different based on the activity of the company, the comparison is made on a sector basis to have a true “apples to apples” comparison. Sector bets versus the broad market are constrained in these portfolios as research has shown that there is no performance benefit to holding static overweight exposures to certain sectors.3
The iShares MSCI World ex Australia Momentum ETF (IMTM) is the only factor ETF where sector constraints are not applied. Research has found momentum at the security, industry and asset class level, so in this case it’s important not to constrain sectors.4
The potential impact of hedging on a fund’s distribution and taxable income has caused concern for investors in the past. The profit and loss from currency hedging may cause unexpected variations to taxable income and the dividends investors receive from the portfolio of securities.
One solution is to use a process called hedge accounting, which can help smooth out the fund’s distributions. The hedged factor ETFs use a hedge accounting method reviewed and agreed by the ATO, so investors can have confidence in an after tax outcome that better aligns to their expectations.
Invest in resilient companies with healthy balance sheets.
Get value from your investment.
Riding on momentum.
Find resilient stocks in times of uncertainty.
Look for size in key markets.
All the factors in one single trade.
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1Source: Jennifer Bender, Remy Briand, Dimitris Melas, and Raman Aylur Subramanian (2013), “Foundations of Factor Investing”, p.8 – ‘Factors are Important in Explaining Manager Returns’
2Ang, A., R. H. Hodrick, Y. Xing, and X. Zhang, 2006. The Cross Section of Volatility and Expected Returns, Journal of Finance 61, 259-299.
3Fama and French, 1997, “Industry Costs of Equity”, Journal of Financial Economics, vol. 43(2), pages 153-193.
4“Do Industries Explain Momentum” by Moskowitz and Grinblatt (1999) and “Understanding the Nature of the Risks and the Sources of the Rewards to Momentum Investing” by Grundy and Martin (2001).
IMPORTANT INFORMATION
Issued by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975, AFSL 230 523 (BIMAL).
The material provides general advice only and does not take into account your individual objectives, financial situation, needs or circumstances. Before making any investment decision, you should assess whether the material is appropriate for you and obtain financial advice tailored to you having regard to your individual objectives, financial situation, needs and circumstances. Refer to BIMAL’s Financial Services Guide on its website for more information. This material is not a financial product recommendation or an offer or solicitation with respect to the purchase or sale of any financial product in any jurisdiction.
Information provided is for illustrative and informational purposes and is subject to change. It has not been approved by any regulator.
This material is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. BIMAL is a part of the global BlackRock Group which comprises of financial product issuers and investment managers around the world. BIMAL is the issuer of financial products and acts as an investment manager in Australia.
BIMAL is the responsible entity and issuer of units in the Australian domiciled managed investment schemes referred to in this material, including the Australian domiciled iShares ETFs. Any potential investor should consider the latest product disclosure statement (PDS) before deciding whether to acquire, or continue to hold, an investment in any BlackRock fund. BlackRock has also issued a target market determination (TMD) that describes the class of consumers that comprises the target market for each BlackRock fund and matters relevant to their distribution and review. The PDS and the TMD can be obtained by contacting the BIMAL Client Services Centre on 1300 366 100. In some instances the PDS and the TMD are also available on the BIMAL website at www.blackrock.com/au. An iShares ETF is not sponsored, endorsed, issued, sold or promoted by the provider of the index which a particular iShares ETF seeks to track. No index provider makes any representation regarding the advisability of investing in the iShares ETFs. Further information on the index providers can be found in the BIMAL website terms and conditions at www.blackrock.com/au.
BIMAL, its officers, employees and agents believe that the information in this material and the sources on which it is based (which may be sourced from third parties) are correct as at the date of publication. While every care has been taken in the preparation of this material, no warranty of accuracy or reliability is given and no responsibility for the information is accepted by BIMAL, its officers, employees or agents. Except where contrary to law, BIMAL excludes all liability for this information.
Any investment is subject to investment risk, including delays on the payment of withdrawal proceeds and the loss of income or the principal invested. While any forecasts, estimates and opinions in this material are made on a reasonable basis, actual future results and operations may differ materially from the forecasts, estimates and opinions set out in this material. No guarantee as to the repayment of capital or the performance of any product or rate of return referred to in this material is made by BIMAL or any entity in the BlackRock group of companies.
This material contains links to third party websites. BlackRock does not control and is not responsible for the information contained within these websites. None of these links imply BlackRock's support, endorsement or recommendation of any other company, product or service.
No part of this material may be reproduced or distributed in any manner without the prior written permission of BIMAL.
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