Invesco, a global investment manager, has launched a multi-factor ETF that incorporates strict environmental, social and corporate governance (ESG) criteria. The fund will be actively managed by the Invesco Quantitative Strategies (IQS) team, who will select a portfolio of global equities that offers optimised exposure to Quality, Value and Momentum risk factors while also meeting high ESG standards.
Gary Buxton, Head of EMEA ETFs at Invesco, says: “Three of the biggest trends we have seen over the past decade are growing demand for multi-factor strategies, ESG investments and ETFs more generally. Proven expertise in all these areas has enabled us to respond to investor demand by delivering a multi-factor solution that adheres to strict ESG criteria and has all the benefits you would expect from our ETF structure.” Since 1983, IQS has been evolving its factor-based, quantitative investment philosophy to incorporate proprietary insights on the behaviour of specific factors and to adapt to the changing needs of investors. Part of this evolution includes almost 20 years’ experience in the implementation of ESG-related strategies. Manuela von Ditfurth, IQS Senior Portfolio Manager at Invesco, says: “This strategy could appeal to ESG-focused investors who want to capture the potential benefits of an increased exposure to factors and are not tightly constrained to traditional benchmarks. We use a proprietary risk model to manage the sector, country, currency and stock-specific exposures with a view to retain only those risks for which we believe the investor should be rewarded.” The investment objective of the Invesco Quantitative Strategies ESG Global Equity Multi-Factor UCITS ETF is to deliver greater risk-adjusted returns over the long term when compared to global equity markets. IQS aims to achieve this by investing in an actively managed portfolio of global equities that meet a defined set of ESG criteria.
Eligible stocks are screened for compliance with the fund’s ESG Criteria, and then scored based on their attractiveness with respect to three investment factors: Value (i.e. companies perceived to be inexpensive relative to market averages), Quality (i.e. companies that demonstrate stronger balance sheets relative to market averages) and Momentum (i.e. companies whose historical share price performance or earnings growth have exceeded market averages). The fund will hold a sub-set of these stocks, using an optimisation process that seeks to maximise exposure to those investment factors whilst targeting a risk profile that is consistent with the investment objective. Fund holdings are rebalanced monthly.