The ETF universe has enjoyed huge growth and many trends continue to support the industry including factor investing. Arne Noack, ETF product manager at Deutsche Asset Management, discusses DeAm’s approach to factor investing.
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The bottom up stock selection process is investigated according to its factor characteristics and is then ranked in accordance to its overall factor exposure. The factors are combined in many ways but begins stock by stock looking at: quality, momentum, value, size, and volatility.
“The result of this stock selection process is very much one where you maintain multiple factor exposures very effectively because you focus on stocks that exhibit positive factor exposures all at the same time and you don’t optimize for a specific outcome,” said Noack. This comprehensive stock selection process is designed to generate long term performance.
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