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Qontigo launches multifactor index suite


Founded last year, Qontigo is an investment intelligence firm with a strong pedigree. It was formed by the recent merger of index specialists STOXX and DAX with Axioma, a provider of enterprise risk analytics and portfolio management technology. The new company is part of the Deutsche Börse Group.

Hamish Seegopaul, Managing Director of Quantitative and Multi-Asset Solutions explains that the driving force in the creation of Qontigo was to bring together an indexing company, STOXX, and an analytics company, Axioma, to provide a platform from which to deliver investment intelligence to investors.

“The over-arching driver was to put together a company that can provide more holistic solutions,” Seegopaul explains. “If you put these two areas of expertise together, then you get a more powerful combination for clients.”

With Axioma’s history of providing quantitative solutions, the new firm is well set up to create more quantitative index solutions for the market, such as the new factor indices the firm has launched recently.

The STOXX Factor Index suite is designed to deliver more clarity to the market for factor investors, with a toolkit of indices for benchmarking and investors, comprising five single factors – Value, Momentum, Size, Low Risk, Quality – and a multifactor index that delivers a diversified exposure to all fixed single factors. Regions covered include Global, US, Europe, Asia Pacific and Global ex-US.

Seegopaul explains that the indices are aimed primarily at ETF issuers and asset owners.

“Although the factor index market is well established, Qontigo has a potential advantage coming in at this stage,” Seegopaul says. “We can address some of the perceived shortcomings of other factor indices, which include constructing indices that control for unintended exposures.”

The new indices are focused on the main driver for performance for each index. “That should be the factor we are targeting,” he says. “And very little else.”

Part of the launch process has been to let the industry know about the direct usage of Axioma’s factor risk models in these indices.

The smart beta ETF sector has not seen so much attention over recent years but Seegopaul reports that factors remain popular, with some ETF issuers reporting 2019 as the best year ever for flows into quant-factor ETFs.

“The hype has died down but the flows are still coming and the interest is still out there,” he says.

The launches include Factor IQ, an online tool that allows users to visualise the current breakdown of factor exposure, based on Axioma’s risk models.

“The end audience could be both retail and institutional, as the construction of these are not overly complex. Even though the tools and techniques are similar to some used by quant mangers, we feel the retail audience is ready for the clarity these techniques can provide.”

Seegopaul believes people are expecting more from their indices. “Not just, for example, another quality index, but a thoughtfully constructed quality index. In terms of where we go from here in the factor space – this is just the start of more products to come from Qontigo,” he says.

“We have the ambition to be a top tier factor index player, so you will hear more from us about expanding this product suite going forward.”

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