What are Factor Indexes?

What are Factor Indexes?

Our Factor Indexes are designed to help institutional investors who seek to capture the excess return of factors in a cost-effective and transparent way. These rules-based, transparent indexes target stocks with favorable factor characteristics – as supported by robust academic findings and empirical results – and are designed for simple implementation, replicability - and use for both traditional indexed and active investment mandates.
A factor index also can bring transparency to factor allocations, helping to alleviate the potential problem of manager style drift and may have positive implications for risk management. Due to the historical cyclicality of factors, investors may want to diversify away from a single factor without to dilut their exposure to their target factors or changing the risk profile of their portfolios. MSCI’s Multiple-Factor Indexes provide building blocks that let investors assemble multiple-factor allocations based on their objectives for risk and return, their investment beliefs on individual factors- and their investability constraints.


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Benefits of our Factor Indexes

Benefits of Factor Indexes

Asset allocation

Adding a factor-return component to portfolio strategies

Performance measurement and attribution

Benchmark factor-driven performance of specific investment strategies, as well as define factor-based stock universes.

Research

A trusted source of data for sell-side research.

Investment product development

May be licensed for use as the basis for structured products and other index-linked investment vehicles, such as ETFs and ETNs.


What types of Factor Indexes do we offer?

What types of Factor Indexes do we offer?

In addition to Single - Factor Indexes, we offer MSCI Multiple-Factor Indexes, which aim to give institutional investors a foundation for implementing multi-factor strategies transparently and efficiently. There are two primary ways to gain multi-factor exposure using our tools:

  • MSCI Diversified Multiple-Factor Indexes: Target outperformance while maintaining a risk profile similar to the parent index, using factor optimization.
  • MSCI Factor Mix Indexes: Aim to represent the performance of equity in multiple factors, while benefiting from diversification and flexibility. The MSCI Factor Mix A-Series, MSCI Factor Mix A-Series Capped and MSCI Quality Mix (E-Series) are part of the MSCI Factor Mix Indexes.

Factor Indexes wm

MSCI Single Factor Indexes: MSCI Factor Indexes are rules-based, transparent indexes targeting stocks with favorable factor characteristics – as backed by robust academic findings and empirical results – and are designed for simple implementation, replicability, and use for both traditional indexed and active investment mandates.

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MSCI Diversified Multiple-Factor Indexes: These indexes combine four well-researched factors — value, momentum, size and quality — with a control mechanism designed to keep volatility in line with the market.

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MSCI Factor ESG Target Indexes: As factor allocations and ESG objectives become simultaneous requirements for many asset owners, MSCI Factor ESG Target Indexes allow clients to develop factor strategies while also integrating ESG considerations.

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MSCI Factor Tilt Indexes: For large-scale asset managers and asset owners for whom investability is critical, narrow factor indexes may not have sufficient liquidity and capacity due to their concentrated nature. The MSCI Factor Tilt Indexes have higher investability requirements by tilting market - capitalization weights of securities based on relevant factor scores.

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Additional insights and research

Factor indexes/Fact or Fiction

Featured content

 
Factor Indexes Performance scorecard

This performance heatmap provides daily and historical performance of our Factor Indexes across various regions to power better investment decisions.

 

Factors are a Thing of the Past - Fact(or) Fiction?

Actually, our data shows factors matter now as much as ever. Read this to understand why.


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