Asset Allocation Research for UK Advisers

Read more to watch Understanding Factor Investing with Henry Cobbe, CFA and Andrew Ang, PhD.

​What a budget. Our initial reaction is that the process leading up to it has been nothing short of shambolic. Endless leaks, speculation, and U-turns have exhausted everyone. Whatever happened to good old-fashioned purdah? Instead, we’ve had a free-for-all of briefings, capped off by a leak on the morning of the announcement - an extraordinary embarrassment that moved bond markets and undermined confidence in the OBR.

Elston Consulting has launched the Elston World Equity Factor Equal Weight Index (ticker ELSFEW).
​
The index represents an equal weight allocation to six London-listed world equity factor-enhanced ETFs from BlackRock’s iShares:including world equity exposures for six different factors: Value, Quality, Size, Momentum, Minimum Volatility and Yield.
The index is available for research purposes and also for potential fund manufacturing by asset managers looking to enter the systematic investing space as a half-way house between traditional active and traditional (market-cap) passive.
An active factor allocation strategy is one of the fund innovations featured on Elston’s Research & Development Wish List, the firm writes.
The fund format is more readily accessible than ETFs to the approximately GBP900 billion AUM platform-based UK IFA market – a fact lost on many US-based ETF issuers who have been waiting over a decade for ETF connectivity on UK platforms to be resolved to unlock that market.  Elston was an early pioneer of “fund of ETFs” to resolve this, with its first fund-of-ETFs launched in 2020.
The new factor index is a sibling index to the Elston World Equity Sector Equal Weight Index launched in 2022 (ticker ELSWES) which was built with London-listed sector ETFs from SPDR.  This sector equal weight index is used as a benchmark for an active sector allocation fund launched by Foster Denovo in 2023 and managed by State Street Global Advisers.
Henry Cobbe, Founder & Head of Research at Elston Consulting, says: “Many UK advisers are aware of the Fama-French three factor model, and see that as a so-called “evidence-based approach”.  The reality is that there are more discernible factors beyond the Fama-French model alone.  So, if advisers are looking at the evidence, they need to consider all the evidence.  Whilst some factors like Value may show strong performance over the very long run, the performance gap between best (Momentum) and worst (Value) factors over the last five and 10 year performance has been huge.  Active factor selection, and “tilting” to prevailing market regimes is key.  A buy and hold approach is really unhelpful if you’ve “set and forget” the wrong factor for a decade or so.”
Hoshang Daroga, Investment Director at Elston Consulting, says: “The concentration issues for traditional world equity indices are well documented.  We see active factor and sector selection as having a key role to play in tilting portfolios to different styles and exposures in different market regimes, and for style diversification purposes.
The challenge is how to evaluate those factor and sector selections given market-cap weighted indices have high concentrations and a resulting inherent bias.  We built the World Equity Factor and Sector Equal Weight indices to help asset allocators evaluate to what extent their active factor or sector selections have added value against a simple equal weight approach.”
Scott Adams, Head of Adviser Relations at Elston Consulting, says: “Elston was one of the early pioneers of index-of-ETFs in 2014 and fund-of-ETFs in 2020.  A rules-based systematic index-of-ETFs helps asset allocators readily evaluate strategies in real time via their preferred data vendor or analytics provider.”

Read the article in ETF Stream

The US equity market has pushed on higher this year fuelled by the AI boom, and investors are beginning to question whether the environment resembles the latter half of the 1990s with its dotcom boom (and subsequent April 2000 bust). While valuations in certain areas look stretched, the broader market picture is more mixed.

Read more to watch The UK's largest dividend payers: a systematic approach to UK Equity Income with Henry Cobbe, CFA and Robert Davies.

Elston Consulting has designed the Elston Smoothed MPS solution that has been manufactured by Elston Portfolio Management for UK advisers. 

The full article is in Money Marketing

​In this article, we break down how smoothing mechanisms work, why they divide opinion, and how we are using them at Elston to build industry-first blended portfolios that aim to deliver a more stable journey for both accumulation and retirement.

Find more about Elston Smoothed Portfolios

The Smoothed Funds Survey provides a valuable look at adviser's current opinions, utilisation, and strategies regarding smoothed and with-profit funds.

Find out more about the Elston Smart-Beta UK Dividend Index (ticker: ELSUKI)
​
For latest UK Equity Income index factsheet click here