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An Introduction to Factor-Based Strategies Through Futures

An Introduction to Factor-Based Strategies Through Futures

STOXX’s head of applied research, Dr. Jan-Carl Plagge discusses how a factor-based strategy via futures opens a new door to uncorrelated risk premia.

What is factor investing all about?
What are the main used factors and use cases for factor investing?
What about derivatives on iSTOXX factors Indexes?

The increasing and more efficient capture of risk sources in the market has allowed investors to exploit these factors to obtain additional returns. Factor investing has seen a veritable surge in interest in recent years, and the possibilities of extracting, adapting and combining factor-based returns keep growing.

STOXX developed the iSTOXX Europe Factor indices in collaboration with Alpha Centauri, covering the following six strategies: carry, low risk, momentum, size, value and quality. The recent introduction of iSTOXX® Europe Factor Index Futures allows investors to pursue factor-based strategies both on a long and short book. They also provide an efficient vehicle to access the pure targeted factor premium independent of any market risk or direction, as investors can hold a factor index future and short.