LONDON (19 November 2018) – Aon, the leading global professional services firm providing a broad range of risk, retirement and health solutions, has developed a customised, multi-factor index, in partnership with index provider Scientific Beta and investment manager Legal & General Investment Management (LGIM).
Factor investing, also known as smart beta, is rapidly transforming the way investors construct and manage portfolios. In addition, defined contribution (DC) schemes are increasingly looking towards these strategies to offer better value for money for their members. While a number of multi-factor funds exist, many of these involved compromises, so Aon has developed its own customised index, based on its long-standing research into alternative indexation and factor-based investing.
Aon sponsored research with Cass Business School which highlighted the potential efficiency gains from investing in an alternative way to market cap indices. Since then, Aon has built on this research and has identified four robust factors which have the potential to offer long-term outperformance: value, low volatility, quality and momentum.
Aon conducted competitive tender processes which resulted in the selection of an index provider, Scientific Beta, based on shared investment beliefs as well as its ability to offer the factors and index construction required, and also an investment manager, LGIM, based on its ability to offer high quality index tracking at low cost.
The multi-factor index, which is available to both Aon’s advisory and delegated clients, was launched in August 2018 and already has over £1.0 billion of assets managed against it.
Andrew Peach, senior investment consultant at Aon, said:
“Schemes are increasingly looking towards factor investing as a way to diversify and improve the investment efficiency of their equity portfolios. After extensive research, we felt there was a need to design a solution that would both reflect our empirical findings and be constructed based on our best ideas and beliefs.
“We looked for providers who could help us implement a product that focuses on the four core factors which our research indicated have the potential for long-term return enhancement and/or risk reduction. This customised factor index will enable our clients to reap the benefits of factor-based investing at low cost.”
Akshay Kapoor, executive director Scientific Beta, said:
“It has been a great initiative to partner with Aon to create this multi-factor fund for its clients. As part of an academic institution, we are particularly pleased that there has been a meeting of minds on investment beliefs and research philosophy - and on our shared goal of demystifying smart beta and improving outcomes for investors.”
Adam Willis, Head of Index & Multi-Asset Distribution at LGIM, said:
“Investors around the globe are looking for ways to ensure deeper diversification of their investments and this multi-factor index will help to address challenges around the efficiency of equity portfolios. This global partnership brings together factor based investing and index expertise from Scientific Beta and Legal & General Investment Management, as well as Aon’s considerable industry experience and high quality research, to provide DB and DC clients with a tailored solution that will meet specific investment objectives.”
For further information please contact:
Colin Mayes Charlie Bristow
Aon Kekst CNC
01372 733689 07973 667291
Notes to Editors
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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Legal & General Investment Management is one of Europe’s largest asset managers and a major global investor, with total assets of £984.8 billion1. We work with a wide range of global clients, including pension schemes, sovereign wealth funds, fund distributors and retail investors.
Throughout the past 40 years we built our business through understanding what matters most to our clients and transforming this insight into valuable, accessible investment products and solutions. We provide investment expertise across the full spectrum of asset classes including fixed income, equities, commercial property and cash. Our capabilities range from index-tracking and active strategies to liquidity management and liability-based risk management solutions.
1LGIM internal data as at 31 June 2018. These figures include assets managed by LGIMA, an SEC Registered Investment Advisor. Data includes derivative positions.
About Scientific Beta
ERI Scientific Beta aims to be the first provider of a smart beta indices platform to help investors understand and invest in advanced beta equity strategies. Established by EDHEC-Risk Institute, one of the very top academic institutions in the field of fundamental and applied research for the investment industry, ERI Scientific Beta shares the same concern for scientific rigour and veracity, which it applies to all the services that it offers investors and asset managers.
The ERI Scientific Beta offering covers three major services: Indices, Analytics and Customised Benchmarks. With a concern to provide worldwide client servicing, ERI Scientific Beta is present in Boston, London, Nice, Singapore and Tokyo. As of June 30, 2018, the Scientific Beta indices corresponded to USD 34bn in assets under replication.