Factor dashboard february 2018 slide1
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For Institutional Use Only

Factor dashboard february 2018 slide2
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Sources: FTSE Russell, Morningstar Direct as of 1/31/18. Past performance does not guarantee future results. The returns of the OFI 1000 & 2000 Dynamic Indexes prior to 11/8/17 represent hypothetical pre-inception index performance (PIP) to illustrate how the index may have performed had it been in existence for the time period prior to 11/8/17. The inception date of the index is 11/8/17. PIP data results are based on criteria applied retroactively with the benefit of hindsight and knowledge of factors that may have positively affected its performance, and cannot account for all financial risk that may affect the actual performance of the ETF. Actual performance of the ETF may vary significantly from the PIP data. The inception date of the ETF is 11/8/17, thus, the first full month of returns began 12/1/17. The management fee for the Oppenheimer Russell 1000 Dynamic Multifactor ETF is 0.29% and the Oppenheimer Russell 2000 Dynamic Multifactor ETF is 0.39%. The OFI 1000 & 2000 Dynamic Indexes "net" represents the index returns net of the management fee. The returns of the Russell Single Factor Indexes prior to 09/30/15 represent hypothetical pre-inception index performance (PIP) to illustrate how the index may have performed had it been in existence for the time period prior to 9/30/15. The inception date of the index is 9/30/15. PIP data results are based on criteria applied retroactively with the benefit of hindsight and knowledge of factors that may have positively affected its performance, and cannot account for all financial risk that may affect the actual performance of the ETF. Actual performance of the ETF may vary significantly from the PIP data. The inception date of the ETF is 11/8/17, thus, the first full month of returns began 12/1/17 The management fee for the single factor ETFs are 0.19%. The Russell Single Factor Indexes "net" represents the index returns net of the management fee.

For Institutional Use Only

Factor dashboard february 2018 slide3
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Sources: FTSE Russell, Morningstar Direct as of 1/31/18. Past performance does not guarantee future results. The returns of the OFI 1000 & 2000 Dynamic Indexes prior to 11/8/17 represent hypothetical pre-inception index performance (PIP) to illustrate how the index may have performed had it been in existence for the time period prior to 11/8/17. The inception date of the index is 11/8/17. PIP data results are based on criteria applied retroactively with the benefit of hindsight and knowledge of factors that may have positively affected its performance, and cannot account for all financial risk that may affect the actual performance of the ETF. Actual performance of the ETF may vary significantly from the PIP data. The inception date of the ETF is 11/8/17, thus, the first full month of returns began 12/1/17. The management fee for the Oppenheimer Russell 1000 Dynamic Multifactor ETF is 0.29% and the Oppenheimer Russell 2000 Dynamic Multifactor ETF is 0.39%. The OFI 1000 & 2000 Dynamic Indexes "net" represents the index returns net of the management fee. The returns of the Russell Single Factor Indexes prior to 09/30/15 represent hypothetical pre-inception index performance (PIP) to illustrate how the index may have performed had it been in existence for the time period prior to 9/30/15. The inception date of the index is 9/30/15. PIP data results are based on criteria applied retroactively with the benefit of hindsight and knowledge of factors that may have positively affected its performance, and cannot account for all financial risk that may affect the actual performance of the ETF. Actual performance of the ETF may vary significantly from the PIP data. The inception date of the ETF is 11/8/17, thus, the first full month of returns began 12/1/17 The management fee for the single factor ETFs are 0.19%. The Russell Single Factor Indexes "net" represents the index returns net of the management fee.

For Institutional Use Only

Factor dashboard february 2018 slide4
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Sources: FTSE Russell, Morningstar Direct as of 1/31/18. Past performance does not guarantee future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect backtested performance. All performance presented of the factor indices prior to the index inception date (September 30, 2015) is backtested performance.

For Institutional Use Only

Factor dashboard february 2018 slide5
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Source: Bloomberg Finance, L.P., as of 1/31/18.

For Institutional Use Only

Factor dashboard february 2018 slide6
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For Institutional Use Only

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A combination of above-trend U.S. economic activity and an accelerating global risk appetite at the end of January has our Dynamic Multi-Factor ETFs in an “expansion” regime.  Given this signal, our multi-factor ETFs are tilted toward the size, value, and momentum factors.  

Above-Trend Growth Likely to Continue in the United States

The leading economic indicators followed by our Global Multi Asset Group (GMAG) suggest that the U.S. economy should continue to grow above trend over the next few quarters. Business and consumer confidence remain high, and activity in cyclical industries such as manufacturing and construction continues to be strong. While monetary conditions are gradually tightening, the current policy stance is not restrictive, and should support economic growth.

In January, GMAG’s market sentiment indicator continued to accelerate. The average risk-adjusted outperformance of riskier asset classes has increased over the past month, driven by strong positive returns across emerging and developed market equities, while most developed fixed income markets have seen flat or negative returns.

Quality and Momentum Factors Outperformed in January

The factor performance trends we witnessed in 2017 continued in January, with quality and momentum outperforming as investors continued to reward companies with strong profitability and low leverage.

The other single factor indices underperformed the Russell 1000 Index in January. One of the month’s weakest performers was yield, which underperformed the Russell 1000 Index by nearly 2% following a sharp rise in interest rates. Higher-yielding stocks tend to carry more debt, and market participants noted that rising net interest costs may potentially add a greater burden to their profitability. The yield factor has the lowest returns of the six factors over the trailing 1-, 5- and 10-year periods as well.

Higher Excess Return Correlation Between Quality and Momentum

Quality and momentum continued to exhibit a higher excess return correlation in January relative to their long-term average. Quality and low volatility, however, have seen a divergence from their long-term correlation of 0.54, showing only a -0.07 correlation.

Size and value experienced a lower excess return correlation of 0.10 in January compared with the trailing 1-year correlation of 0.40. Because of their similar cyclical fundamental characteristics, these two factors tend to behave similarly over time. More recently, however, investors have shunned smaller companies, while value has held up better, and nearly kept pace with the market during the month.

Our Global Multi-Asset Group will continue to monitor the economic environment and global risk sentiment for signs of regime change, which we will reflect in the potential monthly repositioning of the Dynamic Multi-Factor ETFs.