INDEX INVESTMENT STRATEGY Index Dashboard: S&P 500® …
INDEX INVESTMENT STRATEGY
Index Dashboard: S&P 500? Factor Indices
Q1, 2019
QUARTERLY AND 12M TRAILING PERFORMANCE SUMMARY
Q1 2019 Total Return
S&P 500 High Beta S&P 500 Momentum S&P 500 Pure Growth
S&P 500 Quality S&P 500 Growth S&P 500 Equal Weight S&P 500 Buyback S&P 500 Minimum Volatility S&P 500 Low Volatility S&P 500 Dividend Aristocrats S&P 500 Low Volatility High Dividend S&P 500 High Dividend
S&P 500 Value S&P 500 QVM Multi-Factor
S&P 500 Pure Value S&P 500 High Momentum Value
S&P 500 Enhanced Value
18.06% 16.61% 16.59% 16.00% 14.95% 14.91% 13.82% 13.77% 13.62% 12.48% 12.42% 12.23% 12.19% 11.80% 11.79% 9.73%
S&P 500: 13.65%
9.53%
0%
5%
10%
15%
20%
COMMENTARY
12M Total Return
S&P 500 Low Volatility S&P 500 Growth
S&P 500 Momentum S&P 500 Low Volatility High Dividend
S&P 500 Dividend Aristocrats S&P 500 High Dividend
S&P 500 Minimum Volatility S&P 500 Quality
S&P 500 Equal Weight S&P 500 Pure Growth
S&P 500 Buyback S&P 500 Value
S&P 500 QVM Multi-Factor S&P 500 Enhanced Value
S&P 500 Pure Value S&P 500 High Beta -0.40% S&P 500 High Momentum Value -2.46%
14.92% 12.77% 12.74% 12.52% 11.93% 10.72% 10.28% 9.74% 7.22% 6.51% 6.19% 5.93% 4.55% 2.17% 0.37%
S&P 500: 9.50%
-5%
0%
5%
10% 15% 20%
The first quarter of 2019 began with a bullish bounce back as better-than-feared earnings reports combined with a new dovish tone at the U.S. Federal Reserve to set markets on their way to recovery.
With macro concerns at the fore of sentiment, market beta was a key determinant of performance: the S&P 500 High Beta ended on top with an 18% return in Q1, followed closely by Momentum and Pure Growth. As the benchmark S&P 500 completed its best quarter since 2009, every one of our factor indices finished in the black.
The left-hand chart illustrates both the dominance of beta over the past six months, and a potential lesson in the benefits of risk management.
While High Beta, Growth and Momentum topped the charts this quarter, the compound effect of much larger declines in the previous quarter left them with some way to catch up on more defensive strategies.
It is a surprisingly streamlined picture: the ranks of the various factor indices rarely changed over the period, tracking similar paths although at differing risk levels.
Despite the broader market returning more or less to where it was six months ago, the winds have changed since September.
Along with the return of more favourable sentiment towards dividend-based strategies that grew as U.S. rate projections fell, leadership among sectors has shifted significantly.
Illustrating the point, the right-hand chart highlights the more than 90% gross change in sector exposures in the S&P 500 Momentum, from its 21 September 2018 rebalance to its next rebalance on 15 March 2019.
Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of March 29, 2019.
ANNUAL PERFORMANCE
Core factor performance by calendar year, 2004-present:
Total Return Value Low Volatility Momentum Quality
2004 15.71% 17.69% 11.05% 11.21%
2005 5.82% 2.20% 16.69% 5.07%
2006 20.80% 19.69% 9.61% 17.59%
S&P 500
10.88%
Relative to Benchmark
2004
20%
4.91% 2005
15.79% 2006
2007 1.99% 0.58% 9.89% 15.50%
5.49%
2007
Index Dashboard: S&P 500? Factor Indices
Q1, 2019
2008 -39.22% -21.41% -34.56% -34.06%
-37.00%
2008
2009 21.18% 19.22% 17.24% 30.46%
26.46%
2009
2010 15.10% 13.36% 18.72% 14.95%
15.06%
2010
2011 -0.48% 14.78% 1.60% 10.89%
2.11%
2011
Value
15%
10%
Low Volatility
5%
Momentum
0%
Quality
-5% -10%
Total Return Value Low Volatility Momentum Quality
2012 17.68% 10.30% 17.33% 14.68%
S&P 500
16.00%
Relative to Benchmark
20%
2012
Value 15%
2013 31.99% 23.59% 31.42% 34.24%
32.39%
2013
2014 12.36% 17.49% 11.23% 14.95%
13.69%
2014
2015 -3.13% 4.34% 5.56% 0.38%
1.38%
2015
2016 17.40% 10.37% 5.70% 9.56%
11.96%
2016
2017 15.36% 17.41% 28.27% 19.51%
21.83%
2017
2018 -8.95% 0.27% -0.04% -6.79%
-4.38%
2018
YTD 12.19% 13.62% 16.61% 16.00%
13.65%
YTD
10% Low Volatility
5%
Momentum 0%
-5% Quality
-10%
Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of March 29, 2019.
15 YEAR RISK & RETURN - ABSOLUTE
13%
Index Dashboard: S&P 500? Factor Indices
Q1, 2019
15Y Total Return (Ann.)
12%
Low Volatility High Dividend QVM Multi-Factor
High Momentum Value
11%
Buyback
Dividend Aristocrats
Pure Growth
Quality
10%
Low Volatility
Growth
Equal Weight
Pure Value
Minimum Volatility
Momentum High Dividend
9%
S&P 500
8%
Enhanced Value
Value
7%
6%
5%
4%
5%
10%
TOTAL RETURN AND VOLATILITY
15%
20%
Volatility (Ann.)
TOTAL RETURN
1M QTR 1YR 3YR 5YR 10YR 15YR
S&P 500 Low Volatility High Dividend 1.5% 12.4% 12.5% 9.0% 12.0% 18.1% 11.7%
S&P 500 Buyback
-0.8% 13.8% 6.2% 13.2% 10.0% 18.8% 11.0%
S&P 500 High Momentum Value
-1.6% 9.7% -2.5% 10.6% 8.5% 19.6% 11.3%
S&P 500 Dividend Aristocrats
1.8% 12.5% 11.9% 11.8% 11.5% 17.6% 10.7%
S&P 500 Pure Growth
2.2% 16.6% 6.5% 14.4% 10.7% 19.4% 10.7%
S&P 500 Pure Value
-1.6% 11.8% 0.4% 10.2% 6.7% 21.1% 9.9%
S&P 500 Low Volatility
2.3% 13.6% 14.9% 12.0% 11.9% 15.4% 10.0%
S&P 500 Equal Weight
0.9% 14.9% 7.2% 12.0% 9.5% 17.8% 9.7%
S&P 500 Growth
2.7% 15.0% 12.8% 15.9% 13.4% 17.2% 9.6%
S&P 500 Quality
3.0% 16.0% 9.7% 11.6% 10.1% 16.0% 10.3%
S&P 500 High Dividend
1.2% 12.2% 10.7% 10.6% 11.4% 20.0% 9.3%
S&P 500 QVM Multi-Factor
1.9% 11.8% 4.6% 13.1% 10.3% 15.7% 11.4%
S&P 500 Minimum Volatility
2.3% 13.8% 10.3% 10.5% 11.4% 15.2% 9.5%
S&P 500 Momentum
2.8% 16.6% 12.7% 16.6% 13.1% 15.6% 9.6%
S&P 500 Enhanced Value
-1.5% 9.5% 2.2% 13.3% 8.2% 17.9% 8.2%
S&P 500 Value
1.1% 12.2% 5.9% 10.6% 8.0% 14.5% 7.3%
S&P 500 High Beta
0.5% 18.1% -0.4% 15.0% 7.6% 17.3% 4.4%
S&P 500
1.9% 13.6% 9.5% 13.5% 10.9% 15.9% 8.6% Performance figures for more than one year are annualized.
Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of March 29, 2019.
VOLATILITY (ANN.) S&P 500 Low Volatility High Dividend S&P 500 Buyback S&P 500 High Momentum Value S&P 500 Dividend Aristocrats S&P 500 Pure Growth S&P 500 Pure Value S&P 500 Low Volatility S&P 500 Equal Weight S&P 500 Growth S&P 500 Quality S&P 500 High Dividend S&P 500 QVM Multi-Factor S&P 500 Minimum Volatility S&P 500 Momentum S&P 500 Enhanced Value S&P 500 Value S&P 500 High Beta S&P 500
High Beta
25%
1YR 3YR 5YR 10YR 15YR 12.6% 10.8% 10.1% 11.8% 12.4% 17.3% 13.1% 13.1% 14.9% 15.8% 16.7% 12.2% 11.9% 16.8% 17.8% 13.8% 10.7% 10.4% 12.1% 12.5% 18.5% 13.0% 12.7% 15.4% 15.8% 18.5% 14.2% 13.9% 20.0% 20.8% 12.1% 9.6% 9.4% 9.4% 10.1% 16.6% 11.9% 11.6% 15.0% 15.8% 16.2% 11.7% 11.7% 12.8% 13.4% 15.4% 10.7% 11.0% 12.2% 13.0% 13.1% 10.8% 10.3% 13.9% 15.9% 14.8% 11.4% 11.4% 12.8% 13.8% 14.0% 10.2% 9.5% 9.7% 11.0% 17.8% 12.5% 12.1% 13.2% 14.3% 16.6% 13.9% 13.6% 17.4% 18.7% 14.8% 11.3% 11.1% 13.5% 14.5% 22.9% 18.1% 17.9% 23.8% 25.1% 15.3% 10.9% 11.0% 12.8% 13.5%
15Y Outperformance Relative to S&P 500 (Ann.)
15 YEAR RISK & RETURN RELATIVE TO S&P 500
4% 3% 2% 1% 0% S&P 500 -1% -2%
Index Dashboard: S&P 500? Factor Indices
Q1, 2019
Low Volatility High Dividend
QVM Multi-Factor
High Momentum Value
Buyback Dividend Aristocrats
Quality
Pure Growth
Growth Equal Weight
Minimum Volatility
Low Volatility
Momentum High Dividend
Pure Value
Enhanced Value
Value
-3%
-4%
High Beta
-5%
0%
2%
RELATIVE RETURN AND TRACKING ERROR
4%
6%
8%
10%
12%
14%
16%
Tracking Error to S&P 500 (Ann.)
PERFORMANCE v S&P 500
1M QTR 1YR 3YR 5YR 10YR 15YR
S&P 500 Low Volatility High Dividend -0.4% -1.2% 3.0% -4.5% 1.1% 2.2% 3.1%
S&P 500 Buyback
-2.8% 0.2% -3.3% -0.3% -0.9% 2.9% 2.4%
S&P 500 High Momentum Value
-3.5% -3.9% -12.0% -2.9% -2.4% 3.6% 2.8%
S&P 500 Dividend Aristocrats
-0.1% -1.2% 2.4% -1.8% 0.6% 1.7% 2.1%
S&P 500 Pure Growth
0.3% 2.9% -3.0% 0.8% -0.2% 3.5% 2.2%
S&P 500 Pure Value
-3.5% -1.9% -9.1% -3.3% -4.2% 5.1% 1.3%
S&P 500 Low Volatility
0.4% 0.0% 5.4% -1.6% 1.0% -0.5% 1.4%
S&P 500 Equal Weight
-1.1% 1.3% -2.3% -1.5% -1.4% 1.8% 1.1%
S&P 500 Growth
0.8% 1.3% 3.3% 2.4% 2.5% 1.3% 1.1%
S&P 500 Quality
1.1% 2.3% 0.2% -1.9% -0.8% 0.1% 1.7%
S&P 500 High Dividend
-0.7% -1.4% 1.2% -2.9% 0.5% 4.1% 0.7%
S&P 500 QVM Multi-Factor
0.0% -1.9% -4.9% -0.4% -0.6% -0.2% 2.8%
S&P 500 Minimum Volatility
0.4% 0.1% 0.8% -3.0% 0.5% -0.7% 0.9%
S&P 500 Momentum
0.9% 3.0% 3.2% 3.1% 2.2% -0.3% 1.0%
S&P 500 Enhanced Value
-3.5% -4.1% -7.3% -0.2% -2.7% 2.0% -0.3%
S&P 500 Value
-0.9% -1.5% -3.6% -2.9% -2.9% -1.4% -1.3%
S&P 500 High Beta
-1.4% 4.4% -9.9% 1.5% -3.3% 1.4% -4.1% Performance figures for more than one year are annualized.
Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of March 29, 2019.
TRACKING ERROR v S&P 500 (ANN.) S&P 500 Low Volatility High Dividend S&P 500 Buyback S&P 500 High Momentum Value S&P 500 Dividend Aristocrats S&P 500 Pure Growth S&P 500 Pure Value S&P 500 Low Volatility S&P 500 Equal Weight S&P 500 Growth S&P 500 Quality S&P 500 High Dividend S&P 500 QVM Multi-Factor S&P 500 Minimum Volatility S&P 500 Momentum S&P 500 Enhanced Value S&P 500 Value S&P 500 High Beta
1YR 3YR 5YR 10YR 15YR 6.4% 6.4% 7.1% 7.7% 7.1% 4.2% 4.5% 4.5% 5.0% 5.2% 5.0% 5.0% 4.7% 7.8% 7.7% 5.3% 4.6% 4.3% 4.6% 5.1% 5.3% 4.8% 4.8% 5.5% 5.3% 7.1% 6.6% 6.2% 10.8% 10.8% 6.1% 6.5% 6.5% 7.7% 7.2% 2.9% 2.9% 2.7% 4.2% 4.1% 3.0% 3.4% 3.0% 2.8% 3.0% 4.0% 2.8% 2.5% 3.1% 3.2% 6.0% 5.9% 6.8% 8.5% 8.6% 2.0% 3.5% 3.2% 3.4% 4.7% 2.1% 4.4% 4.8% 5.6% 5.2% 4.0% 5.0% 4.9% 5.5% 6.5% 7.1% 7.3% 6.4% 7.9% 8.2% 3.5% 3.8% 3.4% 3.1% 3.3% 8.9% 10.5% 10.0% 13.6% 13.9%
DEGREE OF PORTFOLIO OVERLAP AND RELATIVE RETURN CORRELATIONS
PORTFOLIO OVERLAP
Index Dashboard: S&P 500? Factor Indices
Q1, 2019
Dividend
Value
Value
Enhanced High Beta
Equal Weight Pure Value Buyback
High Momentum Value
QVM Multi-Factor
Aristocrats
Pure Growth Momentum
Low Volatility High High Dividend
Minimum Volatility
S&P 500
500 500
500 500 500
500 500 500 500 500
S&P 500 Growth
Dividend Quality
Low Volatility
500 500 500 500 500 500
S&P S&P
S&P S&P S&P
S&P S&P S&P S&P S&P
S&P S&P S&P S&P S&P S&P
S&P 500 Low Volatility
100% 26% 14% 20% 21% 7% 21% 16% 22% 11% 17% 18% 20% 9% 7% 8% 0% 21%
S&P 500 Minimum Volatility
26% 100% 12% 14% 23% 18% 33% 18% 19% 18% 13% 30% 21% 9% 12% 10% 13% 38%
S&P 500 Low Volatility High Dividend 14% 12% 100% 58% 10% 6% 6% 5% 7% 10% 6% 16% 10% 14% 3% 12% 0% 11%
S&P 500 High Dividend
20% 14% 58% 100% 11% 8% 7% 4% 7% 12% 16% 18% 16% 26% 11% 17% 3% 14%
S&P 500 Dividend Aristocrats
21% 23% 10% 11% 100% 9% 16% 11% 5% 10% 11% 18% 11% 9% 5% 10% 3% 17%
S&P 500 Quality
7% 18% 6% 8% 9% 100% 29% 19% 34% 56% 7% 20% 19% 4% 16% 4% 21% 28%
S&P 500 Growth
21% 33% 6% 7% 16% 29% 100% 34% 34% 23% 7% 29% 38% 0% 14% 3% 22% 67%
S&P 500 Pure Growth
16% 18% 5% 4% 11% 19% 34% 100% 30% 18% 8% 0% 21% 0% 17% 1% 28% 22%
S&P 500 Momentum
22% 19% 7% 7% 5% 34% 34% 30% 100% 38% 8% 12% 20% 3% 10% 4% 14% 24%
S&P 500 QVM Multi-Factor
11% 18% 10% 12% 10% 56% 23% 18% 38% 100% 25% 29% 19% 16% 18% 25% 13% 27%
S&P 500 High Momentum Value
17% 13% 6% 16% 11% 7% 7% 8% 8% 25% 100% 22% 20% 41% 27% 39% 10% 16%
S&P 500 Value
18% 30% 16% 18% 18% 20% 29% 0% 12% 29% 22% 100% 48% 26% 20% 25% 12% 62%
S&P 500 Equal Weight
20% 21% 10% 16% 11% 19% 38% 21% 20% 19% 20% 48% 100% 23% 20% 19% 20% 53%
S&P 500 Pure Value
9% 9% 14% 26% 9% 4% 0% 0% 3% 16% 41% 26% 23% 100% 25% 54% 12% 14%
S&P 500 Buyback
7% 12% 3% 11% 5% 16% 14% 17% 10% 18% 27% 20% 20% 25% 100% 21% 21% 20%
S&P 500 Enhanced Value
8% 10% 12% 17% 10% 4% 3% 1% 4% 25% 39% 25% 19% 54% 21% 100% 9% 13%
S&P 500 High Beta
0% 13% 0% 3% 3% 21% 22% 28% 14% 13% 10% 12% 20% 12% 21% 9% 100% 22%
"Portfolio Overlap" is percentage of index weights held in common between any two indices.
RELATIVE RETURN CORRELATIONS
Dividend
Value
Value
Enhanced High Beta
Equal Weight Pure Value Buyback
High Momentum Value
QVM Multi-Factor
Aristocrats
Pure Growth Momentum
Low Volatility High High Dividend
Minimum Volatility
500 500
500 500 500
500 500 500 500 500
S&P 500 Growth
Dividend Quality
Low Volatility
500 500 500 500 500 500
S&P S&P
S&P S&P S&P
S&P S&P S&P S&P S&P
S&P S&P S&P S&P S&P S&P
S&P 500 Low Volatility
1.00 0.82 0.76 0.64 0.65 0.14 -0.14 -0.27 -0.06 -0.16 -0.04 0.15 0.07 -0.28 -0.31 -0.35 -0.66
S&P 500 Minimum Volatility
0.82 1.00 0.71 0.61 0.62 0.24 -0.07 -0.17 0.05 -0.14 -0.08 0.08 0.08 -0.25 -0.26 -0.38 -0.61
S&P 500 Low Volatility High Dividend 0.76 0.71 1.00 0.91 0.58 0.03 -0.34 -0.40 -0.29 -0.22 0.07 0.34 0.34 0.05 -0.12 -0.12 -0.35
S&P 500 High Dividend
0.64 0.61 0.91 1.00 0.52 0.02 -0.41 -0.40 -0.37 -0.20 0.12 0.40 0.49 0.23 0.03 0.03 -0.14
S&P 500 Dividend Aristocrats
0.65 0.62 0.58 0.52 1.00 0.28 -0.40 -0.29 -0.19 0.02 0.18 0.41 0.37 0.08 0.11 -0.01 -0.32
S&P 500 Quality
0.14 0.24 0.03 0.02 0.28 1.00 0.14 0.19 0.16 0.31 -0.03 -0.13 0.10 -0.12 0.12 -0.23 -0.10
S&P 500 Growth
-0.14 -0.07 -0.34 -0.41 -0.40 0.14 1.00 0.69 0.52 -0.18 -0.60 -1.00 -0.52 -0.70 -0.44 -0.73 -0.25
S&P 500 Pure Growth
-0.27 -0.17 -0.40 -0.40 -0.29 0.19 0.69 1.00 0.52 0.08 -0.22 -0.69 0.01 -0.28 0.02 -0.34 0.16
S&P 500 Momentum
-0.06 0.05 -0.29 -0.37 -0.19 0.16 0.52 0.52 1.00 0.25 -0.08 -0.50 -0.33 -0.36 -0.21 -0.39 -0.18
S&P 500 QVM Multi-Factor
-0.16 -0.14 -0.22 -0.20 0.02 0.31 -0.18 0.08 0.25 1.00 0.55 0.18 0.09 0.20 0.40 0.32 0.17
S&P 500 High Momentum Value
-0.04 -0.08 0.07 0.12 0.18 -0.03 -0.60 -0.22 -0.08 0.55 1.00 0.61 0.50 0.64 0.64 0.72 0.32
S&P 500 Value
0.15 0.08 0.34 0.40 0.41 -0.13 -1.00 -0.69 -0.50 0.18 0.61 1.00 0.52 0.69 0.44 0.73 0.24
S&P 500 Equal Weight
0.07 0.08 0.34 0.49 0.37 0.10 -0.52 0.01 -0.33 0.09 0.50 0.52 1.00 0.70 0.67 0.50 0.51
S&P 500 Pure Value
-0.28 -0.25 0.05 0.23 0.08 -0.12 -0.70 -0.28 -0.36 0.20 0.64 0.69 0.70 1.00 0.68 0.85 0.64
S&P 500 Buyback
-0.31 -0.26 -0.12 0.03 0.11 0.12 -0.44 0.02 -0.21 0.40 0.64 0.44 0.67 0.68 1.00 0.67 0.55
S&P 500 Enhanced Value
-0.35 -0.38 -0.12 0.03 -0.01 -0.23 -0.73 -0.34 -0.39 0.32 0.72 0.73 0.50 0.85 0.67 1.00 0.57
S&P 500 High Beta
-0.66 -0.61 -0.35 -0.14 -0.32 -0.10 -0.25 0.16 -0.18 0.17 0.32 0.24 0.51 0.64 0.55 0.57 1.00
Correlation of weekly excess total returns (versus S&P 500), three years to Mar 29, 2019
Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of March 29, 2019.
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