Factor investing can be summarised as holding assets with specific characteristics to achieve higher returns or lower risk compared to a broad market portfolio. It dates back to the 1960s and has gained momentum over the last 30 years.

As LGIM notes, data suggests that factor-based investing has proven successful over the long run. “The journey of the value and quality factors over the past 15 years serves as a testament to the importance of both a long-term horizon within factor investing, as well as the potential benefits of a multi-factor approach within portfolios,” wrote James Giblin, Fund Manager at LGIM.

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