Continuous Professional Development (CPD) is an important part of any advisor’s career, particularly as times change so rapidly. The speed with which factor investing strategies, in particular smart beta products, have imposed themselves in the investment landscape, has left many at a disadvantage when explaining factor investing to clients and prospects.
The following module aims to bridge that gap. We invite financial professionals engaging with this course to digest the information, and then take an optional test at the end. We aim to present the module using clear language, charts, videos and a short case study to enhance the learning experience. Each of the eight chapters should takes up to 15 minutes to thoroughly digest, with a summary and the optional test aimed at reinforcing the knowledge.
A score of at least 12 out of 15 correct answers (80%) for the test will count up to two hours towards your professional CPD requirements. The educational module is already accredited by local and global institutes, including CII, FPI, CISI, FPSB, AFP, FPI, and IBF.
CFA Institute allows its members the ability to self-determine and self-report professional learning credits earned from external sources. CFA Institute members are encouraged to self-document such credits in their online PL tracker.
Good luck!
- 01
What is factor investing
You’ve probably heard of factor investing. But what does it mean exactly and how widespread has this investment approach become?
Learning objectives
The basic principles behind factor investing
When its foundations were laid
That factor investing has rapidly gained popularity among investors
- 02
Why is factor investing so popular?
Factor investing can be viewed as a third way of investing next to traditional fundamental active and passive strategies.
Learning objectives
How factor investing fits between active and passive
Why it is a proven concept
Why so many investors have embraced it
- 03
The academic evidence for factor investing
Factor investing is based on thorough academic research, with over four decades of empirical research showing it to be a robust investment concept.
Learning objectives
How factor premiums were discovered
Which were the most important milestones for factor investing
How current research goes well beyond equities and bonds
- 04
Which factors actually work?
Over the years, dozens of purported factors have been identified by researchers. But are all the anomalies included in the ‘factor zoo’ worthy of consideration?
Learning objectives
The criteria a proven factor should meet
Which factors are the most broadly accepted
The basic definitions of common factors
- 05
Enhance returns or reduce risk?
Factor investing can help pursue two main investment goals: reduce risk and enhance returns. But how does that work in practice?
Learning objectives
The historical performance of proven factors
How factors can help achieve higher long-term returns
The basics of low-risk investing
- 06
Additional benefits of implementing factor investing
Factor investing can also help achieve very specific purposes, such as those most frequently cited in the latest annual survey of asset owners by FTSE Russell (see Figure 8).
Learning objectives
Some of the objectives leading investors to consider factor investing
The mechanics at work behind each objective
That different goals can be pursued simultaneously
- 07
What makes a factor strategy really efficient?
Not all products, labelled as factor strategies lead to the best investment outcomes. In particular, generic products can prove disappointing over time.
Learning objectives
Why generic factor investing products may not be the best option
How enhanced strategies address the pitfalls of generic products
That asset-specific challenges must also be considered
- 08
From theory to practice
Over the past decade, the financial industry has seen a structural shift as investors allocated funds from actively managed fundamental strategies to passive vehicles and factor investing strategies. How can investors benefit from factor premiums?
Learning objectives
Why factor investing has been embraced
How factor investing can be implemented
Where to start when evaluating factor investing strategies
- 09
Summary
In this final chapter, we summarize the main points:
Ready for the test?
Now that you’ve learned the basics of factor investing, it’s time to test your knowledge. Below are 15 multiple-choice questions on the 8 chapters you have completed. Click on the box that you think contains the correct answer. If you answer 12 or more questions correctly, you will be awarded 2 hours of CPD.
