The Global X research team has updated the Scientific Beta Factor Report for Q1 2017 analyzing the performance and characteristics of factors in the US and international markets. The full Factor Report can be read here.
United States: Momentum Returns
In 2016, Momentum was the biggest laggard, returning just 5.03% over the course of the year vs. 11.96% for the S&P 500. In Q1 2017, however, Momentum reversed course and was the best performing factor with returns of 7.05% vs. 6.07% for the S&P 500. Size, Low Volatility, and Value each underperformed during the quarter.
In the international arena, factors demonstrated strong results in Europe and Japan during the quarter, but lagged behind in the Asia ex-Japan region.
In Europe, each of the four factors discussed above outperformed the benchmark Stoxx Europe 600 index. The best performer was the Momentum factor, generating 182 basis points (bps) of outperformance over the benchmark index's 7.63% return. The Size factor followed with 179 bps of outperformance, Low Volatility outperformed by 63 bps, and Value by 20 bps.
In Japan, the benchmark MSCI Japan Index returned 4.49%, and was outperformed slightly by Size (34 bps), Value (31 bps), and Momentum (6 bps). Low Volatility was the only underperformer, falling short of the benchmark by 59 bps.
The benchmark MSCI Pacific ex-Japan Index rallied 11.76% in Q1, but each of the four factors lagged behind. Value underperformed by 26 bps, Low Volatility and Momentum each underperformed by 102 bps, and the Size factor lagged by 259 bps.
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return will be so that an investor's shares, when redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For current performance, please click on the fund ticker: SCIU, SCID, SCIX, SCIJ.
Past performance is no guarantee of future results. Indices are unmanaged and do not include the effect of fees, expenses or sales charges. One cannot invest directly in an index.
SBUXRHMN Index: The objective of the Scientific Beta United States Multi-Beta Multi-Strategy Equal Risk Contribution (NYSEMKT:ERC) Index is to represent the performance of large and medium capitalisation companies from the United States universe while outperforming the capitalisation-weighted reference (the Scientific Beta United States Cap-Weighted Index for this universe), with a limited amount of relative risk against that reference.
SBRXRHMN Index: The objective of the Scientific Beta Extended Developed Europe Multi-Beta Multi-Strategy Equal Risk Contribution Index is to represent the performance of large and medium capitalisation companies from the extended developed European countries universe while outperforming the capitalisation-weighted reference (the Scientific Beta Extended Developed Europe Cap-weighted Index for this universe), with a limited amount of relative risk against that reference.
SBAXRHMN Index: The objective of the Scientific Beta Developed Asia-Pacific ex-Japan Multi-Beta Multi-Strategy Equal Risk Contribution Index is to represent the performance of large and medium capitalisation companies from the developed Asia-Pacific countries universe excluding Japan while outperforming the capitalisation-weighted reference (the Scientific Beta Developed Asia-Pacific ex-Japan Cap-Weighted Index for this universe), with a limited amount of relative risk against that reference.
SBJURHMN Index: The objective of the Scientific Beta Japan Multi-Beta Multi-Strategy Equal Risk Contribution Index is to represent the performance of large and medium capitalisation companies from the Japan universe while outperforming the capitalisation-weighted reference (the Scientific Beta Japan Cap-Weighted Index for this universe), with a limited amount of relative risk against that reference.
S&P 500 Index: The S&P 500 is an index of 500 stocks chosen by factors such as market size, liquidity and industry grouping. The Index is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large-cap universe
Stoxx Europe 600 Index: The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. With a fixed number of 600 components, the STOXX Europe 600 Index represents large, mid and small capitalization companies across 18 countries of the European region: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
MSCI Pacific ex Japan Index: The MSCI Pacific ex Japan Index captures large and mid cap representation across 4 of 5 Developed Markets (NYSE:DM) countries in the Pacific region (excluding Japan). With 150 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country
MSCI Japan Index: The MSCI Japan Index is designed to measure the performance of the large and mid cap segments of the Japanese market. With 318 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in Japan.
Carefully consider the Funds' investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Funds' summary or full prospectus, which may be obtained by calling 1-888-GX-FUND-1 (1.888.493.8631), or by visiting www.globalxfunds.com. Read the prospectus carefully before investing.
Investing involves risk, including the possible loss of principal. In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. For the Scientific Beta Japan ETF, the Japanese economy may be subject to considerable degrees of economic, political and social instability, which could have a negative impact on Japanese securities. In addition, Japan is subject to the risk of natural disasters, such as earthquakes, volcanoes, typhoons and tsunamis, which could negatively affect the Fund.
Diversification may not protect against market risk. There is no assurance the goals of the strategy discussed will be met.
Shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Global X NAVs are calculated using prices as of 4:00 PM Eastern Time. The market price is the Mid-Point between the Bid and Ask price as of the close of exchange and does not represent the returns an investor would receive if shares were traded at other times.
EDHEC Risk Institute Asia Ltd. indexes have been licensed for use by Global X Management Company, LLC. Global X Funds are not sponsored, endorsed, issued, sold, or promoted by EDHEC Risk Institute Asia Ltd. nor does this company make any representations regarding the advisability of investing in the Global X Funds.
Global X Management Company, LLC serves as an advisor to the Global X Funds. The Funds are distributed by SEI Investments Distribution Co., which is not affiliated with Global X Management Company, LLC.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.