Invesco PowerShares has launched five ETFs offering focused exposure to factor investing in the European equity market.
The ETFs track the Solactive Tradable European Factor indices, which are derived from a universe of 675 stocks.
Each index is created by selecting the 50 stocks with the greatest exposure to the respective factor.
Liquidity and tradability of the underlying stocks are taken into account to reduce concentration risk, while the indices are rebalanced monthly.
Chris Mellor, equity product specialist at Invesco PowerShares, said: "First of all, factors are nothing new.
"Academics have been researching them for decades to explain stock performance. What has become evident more recently is the way investors are using them to enhance performance or hedge risk in their portfolios.
"Each of these factors has outperformed the broad equity market over the longer term but individual performance can vary significantly in the short term.
"This provides investors with an opportunity to capture additional performance if they are able to adjust exposure at the appropriate times.
"We expect these new ETFs to attract a variety of investors who want to pursue factors from either a tactical or a strategic perspective.
"For example, hedge funds are likely to use them in the same way as our sector ETFs, providing them with an easy way to capture or adjust exposure to a specific part of the market for hedging purposes."
The new products are PowerShares Tradable European Value Factor Ucits ETF, PowerShares Tradable European Quality Factor Ucits ETF, PowerShares Tradable European Low Beta Factor Ucits ETF, PowerShares Tradable European Price Momentum Factor Ucits ETF and PowerShares Tradable European Earnings Momentum Factor Ucits ETF.
They have an ongoing charge of 0.3 per cent a year.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said these sorts of ETFs are almost exclusively for professional investors as there is a high degree of sophistication and expertise required to understand the product and its use in a portfolio.
He said: "You shouldn’t judge a book by its cover, and that’s true of factor ETFs too, and anyone considering investing should place close attention to the construction of the indices which these products track, to ensure everybody’s on the same page about what constitutes each of these factors."
emma.hughes@ft.com
