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Index IDEA: Quality tops US large cap factors in 2017; FTSE Russell and OppenheimerFunds

Quality and Value traded places as the lead driver of US large cap equity market performance in 2017, with quality-oriented stocks taking the lead within the Russell 1000 Index through the end of September according to FTSE Russell and OppenheimerFunds.

In 2016, value-oriented US large cap stocks led other market factors including Yield, Size, Low Volatility, Quality and Momentum in 2016 with an 18.7% return, with Quality near the bottom with a 10.7% return, as measured by Russell 1000 Global Factor Indexes.

In 2017 through the end of September, quality-oriented stocks have a 19.1% return, outpacing all other major market factors and the Russell 1000 Index, with a return of just 11.3% for Value.

Notably, the Russell 1000 OFI Dynamic Multifactor Index recently developed by FTSE Russell and OppenheimerFunds, is just behind Quality in 2017 with a 17.3% return.

David Mazza, head of ETF investment strategy, OppenheimerFunds, said:

“Quality led the way in 2017 as investors sought out companies with high quality balance sheets and earnings amid concerns regarding US equity market stability and uncertainty about the future direction of Fed policy and interest rates. However, as our analysis indicates, factor performance is often cyclical and it can be difficult to predict which individual factors will lead from one time period to the next, so a dynamic combination of factors can provide a more resilient perspective as economies and markets evolve. For example, our dynamic multifactor index, created with FTSE Russell, has a 17.3% return in 2017 as it has adapted to the current environment.”

Rolf Agather, director of North America research, FTSE Russell, said:

“Factor indexes are an efficient, transparent and cost effective way for investors to define and measure major market factors and, as the basis for ETFs, can be used as effective portfolio building blocks by factor investors.”

Notably, Quality has the highest return among factors within the US large cap segment for the first time since 2007. These index returns are part of a long-term historical ‘quilt chart’ of factor index returns shared by FTSE Russell and OppenheimerFunds to educate clients on Oppenheimer’s recently introduced suite of dynamic multifactor and single factor ETFs based on indexes from FTSE Russell.

Learn more about our smart beta and factor indexes.



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All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein.

Views expressed by Rolf Agather of FTSE Russell and David Mazza of OppenheimerFunds are as of November 14th and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Russell Indexes or the fitness or suitability of the indexes for any particular purpose to which they might be put.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this IDEA should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

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