MSCI announces results of factor based index study for Japanese GPIF

US index provider MSCI has confirmed the completion of a research mandate on behalf of Japan’s Government Pension Investment Fund (GPIF), which assessed the uses of factor-based indices in large institutional portfolios.

GPIF, which is the world’s largest pension fund, has commissioned the study in April, announcing that it intended to introduce factor allocation in addition to its existing active and passive mandates.

According to the study commissioned by GPIF, passive factor strategies which are facilitated by newly developed factor indices, and active management are not mutually exclusive.

Chin Ping Chia, head of Index Applied Research for MSCI in Asia Pacific, said, “As factor-based investing becomes more common among institutional investors, there is a growing need to understand how it can be best integrated into the existing investment process

For the purposes of the research, MSCI created a series of factor indexes designed for large-scale asset owners and managers, for whom investability is a critical consideration.

These indexes reweighted all the constituents of a market cap index based on six systematic factors – Value, Low Size, Low Volatility, High Yield, Quality and Momentum. MSCI also analyzed various multi-factor indexes to show the different historical performance characteristics of different combinations.

“Sophisticated institutional investors may increasingly make an independent allocation to passive factor investments, in parallel to their existing active and passive mandates” concluded Baer Pettit, MD and global head of MSCI’s index business.

 

 

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