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Index IDEA: Examining historical results of a diversified factor approach

According to the first FTSE Russell retail financial advisor survey, published in September, smart beta index adoption by financial advisors is prevalent and broad-based. This survey - Smart Beta: 2015 survey findings from U.S. financial advisors - confirms an increased interest in, and adoption of, multiple smart beta indexes among retail financial advisors. Among new smart beta investment approaches tested in the survey, a multifactor (or factor combination) strategy showed the most potential for adoption, with 37% of financial advisors saying they would be very likely to use this approach, which combines multiple factors such as low volatility, quality and value.

To help investors understand the effects of diversifying across market factors, recent FTSE Russell index analysis shows the Russell 1000® Comprehensive Factor Index performance compared with its market cap weighted counterpart the Russell 1000® Index for all historical time periods analyzed. The index employs FTSE Russell’s unique sequential tilt methodology that combines the five factors without losing exposure to each individual factor.

Guillermo Cano, Director, Alternatively Weighted Products, FTSE Russell:
“While investors have long recognized that underlying factors such as quality, size, value, volatility and momentum help influence equity market performance, in recent years they have been able to take a more nuanced approach to understanding the influence of factors through smarter market indexes.”

Dodd Kittsley, Head of ETF Strategy, Deutsche Asset & Wealth Management:
“There has been a remarkable increase in the use of equity factors within investor portfolios. In addition to traditional sector and country diversification, many investors are diversifying across multiple factors to address their long-term investment objectives.”

More information on the FTSE Russell retail financial advisor survey and the FTSE Russell Comprehensive Factor Indexes can be found on the FTSE Russell website.

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London Stock Exchange Group companies includes FTSE International Limited (“FTSE”), Frank Russell Company (“Russell”), MTS Next Limited (“MTS”), and FTSE TMX Global Debt Capital Markets Inc (“FTSE TMX”). All rights reserved.

Opinions expressed by Guillermo Cano of FTSE Russell and Dodd Kittsley of Deutsche Asset & Wealth Management are as of December 7, 2015, and are subject to change. And opinions expressed by Mr. Kittsley do not necessarily reflect the opinions of FTSE Russell or the London Stock Exchange Group.

Deutsche Asset & Wealth Management (DEAWM) is not an affiliate of the London Stock Exchange Group.

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The London Stock Exchange Group companies do not provide investment advice and nothing in this communication should be taken as constituting financial or investment advice. The London Stock Exchange Group companies make no representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

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Past performance is no guarantee of 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 reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.

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