Mark Carver, executive director, head of Factor Index Products, MSCI spoke at the recent Inside ETFs conference in London on the launch of the firm’s MSCI FaCS and Factor Box, designed to bring clarity to the confusion of smart beta.
Carver (pictured) says: “We heard time and again through conversations we were having with clients, such as wealth advisers and asset owners, that they were overwhelmed by the proliferation of factor products and research papers.
“What we think is lacking is a starting point so the intention of FaCS was to create an intuitive common language for factor investing.”
Carver likens it to sectors of investing where MSCI’s Global Industry Classification Standard (GICS) was brought in to lessen the blurring of lines across equity sectors.
“We are trying to have a single language for factor exposures so an asset owner could look at a range of products and filter them through a single consistent framework,” Carver explains.
“We know that factors are important drivers of risk and return and you may be taking on unintended risk or have exposures you are unaware of,” Carver explains.
FaCS is being introduced globally through MSCI’s data solutions allowing clients to subscribe and utilise the security level calculation based on any equity portfolio. It is being rolled out through a combination of ground coverage sales campaigns, roadshows and media events, such as conferences.
“Response has been overwhelmingly positive,” Carver says. “Far better received than we anticipated at this stage, with subscribers in every region of the world and every type of client channel from pension funds, quants, discretionary stock pickers, global consultants and wealth platforms. The common thread is that they see the need for a common starting point for Factor (Smart Beta) Investing and believe we are uniquely positioned as an organisation to provide this service.”
Carver believes that for anyone who trades stocks this service is critical whether it is a long only fund manager, an ETF or a market neutral hedge fund.
FaCS measures across eight factor groups. “The benefit of FaCS is that it simplifies the factor conversation from the narrow domain that quants want to discuss, up to the eight broad well known themes such as value, quality and momentum. These intuitive ideas have been masked in technological language which FaCS simplifies, thereby opening up the conversation to the broadest possible audience.”
“Investors may understand information differently. Some people want to see numbers and some want a picture so Factor Box takes the data and numbers behind FaCS and puts into a visual that is easy to interpret. The Factor Box allows you to put two managers side by side and immediately see the differences in factor exposures.”
