In this month’s interview, Laurent Trottier, Global Head of ETF, Indexing & Smart Beta Management, Amundi, comments on the growth of Factor Investing in an institutional context. He tells us about the demand for Smart Beta strategies in equity and also bond markets, and shares his views on the main challenges for asset managers involved in Smart Beta and Factor Investing.
EDHEC-Risk Institute, with the support of Amundi ETF, Indexing & Smart Beta, just released a publication entitled “Smart Beta and Beyond: Maximising the Benefits of Factor Investing”. How do you assess the growth of factor investing in an institutional context?
Investors are showing a growing appetite for Smart Beta & Factor Investing solutions as a way to better manage risks, hence delivering sustainable performance in the long run. In terms of allocation tools, investors have a wide scope of possibilities from active funds to ETF vehicles but they also want to be flexible and fit within their structural requirements; it means asset managers need to build more customised solutions.
Multi factor allocation is the main trend we have noticed, with a strong interest in dynamic allocation to help investors managing risks, including market regime shifts.
Where do you see further development for Smart Beta & Factor Investing solutions, in terms of vehicles, asset classes, etc?
Our clients who invest in smart beta and factor investing products have specific investment requirements such as reducing their overall portfolio risk, improving diversification or enhancing their risk-adjusted returns. Clients want more development in this area, and they are looking for more customised solutions such as applying a smart beta strategy to their equity portfolio or combining a smart beta equity portfolio with an ESG filter. Regarding other asset classes, they are also looking for fixed-income smart beta solutions.
For that matter, Amundi ETF, Indexing & Smart Beta is going one step further by extending the scope of its partnership with the EDHEC-Risk Institute to the Fixed Income field, having previously focused on equity-based factor investing. This partnership demonstrates Amundi’s continuous commitment to addressing investor needs through education and research, and offering them robust investment solutions that answer specific investment needs.
What do you consider as the main challenges in the Smart Beta & Factor Investing field?
We see two main challenges in this growing market when it comes to managing smart beta and factor investing solutions. The first one is implementation: beyond the question of where Smart Beta could slot into a portfolio, the challenge for asset managers is to provide solid management and replication capabilities. In addition to our 10-year knowledge of Smart Beta strategies, being part of Amundi enables us to benefit from the group’s pricing power to lower transaction costs. Transparency is also very important: Amundi is fully committed to providing investors with all necessary information on product structuring and above all on the index methodology and management process to facilitate selection and reporting.
About Laurent Trottier
Laurent Trottier was appointed Global Head of ETF, Index and Smart beta management at Amundi in September 2014.
Laurent was Head of Index Management at Amundi since 2005 and started his career in the Group in 2002 as a passive equity portfolio manager at Crédit Lyonnais Asset Management (CLAM), which merged with Crédit Agricole Asset Management (CAAM) in July 2004.
Prior to that position, Laurent Trottier was a portfolio manager at State Street Banque SA (1999-2002). Laurent Trottier is a CFA Charter holder (2002) and has an engineering degree (1999) from ENSIMAG (modelling and economics decision specialization). He also holds a post-graduate degree in finance from the University of Grenoble.
About Amundi ETF, Indexing and Smart Beta
With more than €1,400 billion worldwide of assets under management1, Amundi is one of the world‘s leading Asset managers2. The ETF, Indexing and Smart Beta business line is one of the group’s strategic business areas and totalizes €84 billion AuM1.
Built on strong commitments on cost-efficiency, innovation and transparency, the Amundi ETF platform is the 5th largest ETF provider in Europe3 with 100 ETFs and >450 listings across Europe.
On Indexing and Smart Beta, innovation and customization are at the core of the client-oriented approach. The objective is to provide investors with robust, flexible and highly cost efficient solutions, leveraging on Amundi pricing power and extensive resources, including first class research capabilities in SRI and Factor investing.