According to Société Générale’s Cross Asset research team, there are two types of value investors: patient value investors seeking to benefit from compounding above average dividend yields offered by quality companies, and brave value investors seeking to gain from a share price recovery in companies currently discounted by the market….
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Following the successful launch of the Lyxor ETF range on SG Quality Income strategies (now accounting for close to USD500 million of assets), Lyxor launches a new ETF based on the SG Value Beta index which also aims to generate long-term outperformance.
The new SG Value Smart Beta index, also developed by Andrew Lapthorne and Georgios Oikonomou, Global Quantitative Research Strategists at SGCIB, aims to track the performance of the “brave value investor” by investing in the 200 cheapest stocks on a sector relative basis in global developed markets. It has clearly demonstrated higher returns than the market historically and higher returns than the SGQI quality approach, but along with it, higher risk.
The SG Quality Income Index, developed in 2012, aims to track the performance of the “patient value investor” by buying sensible higher quality companies with an above market dividend yield. Historically it has generated steady outperformance with lower volatility than the overall market.
Andrew Lapthorne comments: “By combining the Brave and Patient Smart Beta value index, we believe the investor can get the best of both worlds, with full exposure to the value premium and the ability to become increasingly brave or patient depending on their risk tolerance. Building a portfolio mixing such types of risk Factor’s strategies is becoming increasingly popular as an alternative to diversifying in the traditional way, by asset class”.