Factor-Based Investing

Parametric’s factor-based equity portfolios are designed to maintain a systematic bias towards factors such as Dividend Yield, Value, Quality, Momentum, Low Volatility and Profitability. This reflects the client’s expectation that the factor-based (“smart beta”) approach will outperform a market capitalisation weighted portfolio in the long term. We offer factor-based portfolios as separate accounts and construct the portfolio based on the superannuation fund client’s chosen factor index or blend of factor indices. We can create a custom portfolio over almost any Australian equity or global equity factor index the client chooses. Our sophisticated optimisation approach works to eliminate unintended exposures and other portfolio risks, to deliver the fund’s particular factor-based investment mandate with efficient implementation.

We provide per-client customisation and transparency which gives the client fund greater control over their factor portfolio. We can also build portfolios using a blend of factors, or blend single or multiple factors with a market capitalisation weighted portfolio to closely meet a client’s specifications such as a target level of tracking error. Some clients use our portfolios tactically (opportunistically), while others use our factor capabilities to construct a core strategic exposure to equities.

Factor portfolios can be customised to reflect the client’s instruction to capture the value of franking credits (for Australian equities) or delivered as a fully tax-managed Australian or global equity solution designed to outperform the chosen index on an after-tax basis. We can also implement a fund’s Responsible Investing requirements as part of a factor-based portfolio. For example, funds can add restrictions on fossil-free, cluster munitions or tobacco exposures, or apply a Catholic Values screen.

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