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Aon paper says multi-factor approach can enhance DC schemes’ equity portfolios

LONDON (1 May 2018) – Aon, the leading global professional services firm providing a broad range of risk, retirement and health solutions, has issued ‘The Rise of Factor Investing: investing for DC savers’. This new paper provides insight into achieving ‘style’ diversification, in particular, the role that factor investing can play in improving defined contribution (DC) schemes’ equity portfolios.

Factor investing, also known as ‘smart beta’, has experienced a sharp rise in recent years as a low-cost approach which can help DC schemes to improve member outcomes. Aon has identified four preferred equity factors that all offer the potential for long-term return enhancement and/or risk reduction: low volatility, value, quality and momentum.

Chris Inman, head of DC investment advisory at Aon, said:
“We are recommending that all DC schemes introduce further diversification into their equity portfolios and believe that factor investing is an important component of this. We believe that DC schemes should consider combining the four factors into a multi-factor equity portfolio in order to smooth returns and mitigate the risk of underperformance from any one factor. Moreover, with a number of platforms already offering factor funds, we expect the choice of strategies for DC investors only to grow .                                                 

“There are a number of important considerations when constructing a multi-factor portfolio and our analysis has led to the recommendation that DC schemes should concentrate on global developed markets, begin by equally weighting the factors, and neutralise the regional weights.”

‘The Rise of Factor Investing’ is available at:

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For further information please contact:
Colin Mayes                                      Tommy Cooper
Aon                                                  CNC
01372 733689                                    020 37551 641             

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About Aon

Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

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