Emerging Markets Through a Factor Lens

FTSE Factor Index analysis suggests there's value there

SEATTLE, WA–(Marketwired – Jun 22, 2015) – An analysis of the six market factors influencing performance for the FTSE Developed Index and FTSE Emerging Markets Index over the last five years suggests that the value factor may be emerging in 2015 as a key differential between developed and emerging markets.

FTSE Russell Factor Index analysis breaks developed and emerging market performance into six key factors – liquidity, momentum, quality, size, value and volatility.

A closer look at these factors shows that in 2015 year-to-date emerging markets have outperformed developed in the value factor by nearly 4%.

FTSE Developed & Emerging Markets Value Factor Index Performance – as of 29 May 2015

Index                      YTD           5 Yrs             Index                             YTD             5 Yrs

Emerging Index       6.3%        25.4%      FTSE Developed Index         5.5%            86.7%
Emerging Index
Value Factor            8.7%        20.4%      FTSE Developed IVF             5.1%          78.7%

Source: FTSE Russell. Total returns, US dollar denominated. Past performance is no guarantee of future results.

The FTSE Global Factor Index Series is a new suite of benchmarks designed to represent the performance of specific factor characteristics, with six single factor indexes and additional combinations of factors comprising the index series.

The six factors represent comment characteristics for which there is a broad academic and practitioner consensus, supported by empirical evidence across different geographies and time periods.

Rolf Agather, MD of North America research for FTSE Russell said:

"Smart beta indexes have given asset owners and their consultants more choice and greater flexibility in the tools available for analyzing markets and constructing portfolios with an outcome-oriented focus. But increases in choice and flexibility mean that investors require more information as they work to make their decisions. Institutional asset owners are increasingly using more smart beta indexes and in a variety of new ways. This is outstanding for the industry, but reinforces the need for further education, information and advice."

In May, FTSE Russell shared the results from its second annual global institutional smart beta survey, which is designed to gauge investor perceptions, interest and engagement with smart beta indexes. Results this year indicated that asset owner allocation to smart beta indexes is growing and broadening.

And, in Europe specifically, the survey found that 70% of institutional investors with smart beta allocations are now combining smart beta indexes and that low volatility, risk parity and multi-factor combinations are the most evaluated smart beta indexes in Europe.

For more information on the second annual FTSE Russell global institutional smart beta survey, go to the FTSE Russell website.



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