AXA IM SmartBeta Equity strategy successfully navigates turbulent market storms
Recent market turbulence has provided a valuable ‘real life’ test to AXA IM’s SmartBeta Equity strategy. The AXA IM ACWI SmartBeta Equity Fund (the fund) performed strongly during the ‘China growth fear’ equity market sell-off in August, illustrating the strategy’s expected lower level of drawdown during market shocks. From 11 August to 25 August, the MSCI ACWI World ex-Australia Index fell 8.0% (AUD) while over the same period the AXA IM ACWI ex-Australia SmartBeta Equity strategy fell 6.7%.
Launched in August 2014, the fund offers Australian investors a more efficient way of capturing long-term equity market returns while incurring lower volatility than a capitalised weighted benchmark. The fund, powered by AXA Rosenberg, the quantitative investment team within AXA IM, has successfully navigated three periods of market stress over the past 12 months.
Now at its one year anniversary, Jeremy Baskin, CEO and CIO at AXA Rosenberg, said the fund has successfully delivered the expected lower level of drawdown during market shocks and has returned 37.37% versus the Index return of 32.44% (outperformance of 4.93%) since inception of August 7th 2014 thru August 6th 2015.
“The SmartBeta equity strategy offers a sensible middle ground between blind index tracking and alpha-oriented strategies so equips equity investors with a better chance of improving long-term investment success in a more cost efficient way,” Mr Baskin said. “One example is by avoiding companies that exhibit ‘unrewarded risk’ while at the same time focusing on companies with strong earnings sustainability, a smart beta strategy can offer investors both the benefits of lower volatility while also improving long-term returns.”
Mr Baskin added that the fund’s in-built ESG considerations also positively impacted performance as avoidance of a number of oil service companies, proved helpful over the past year as the price of oil dropped by half.
Investors are interested in the “blending” of various risk premia
AXA IM Director for Australia and New Zealand Craig Hurt, said as market participants have become more comfortable with the concept of smart beta investing, there is an increased interest in the “blending” of various risk premia.
“The smart beta conversation has evolved from investors considering strategies that just focus on one risk premia to a blended, more sophisticated risk management approach. When smart beta approaches are considered in a risk factor analysis framework, investors are exposed to a more diversified set of risk factors and can better control their risk and harvest a wider range of risk premia,” Mr Hurt said.
“The patterns of active returns for each smart beta strategy in the short term are generally imperfectly correlated and this means that smart beta strategies can be combined to target a desired risk and return outcome in a more diversified and targeted manner,” he said.
Leveraging the global investment firm’s long history of global equity management and experience in managing risk-efficient portfolios, AXA IM has launched a series of blended SmartBeta equity strategies with a focus on a number of risk premia such as value and momentum along with insights into quality and low volatility risk premia.
