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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