i

Riskfaktorer

Tidigare resultat förutsäger inte framtida avkastning. De pengar som placeras i Xtrackers ETF:er eller Xtrackers ETC:er kan både öka och minska i värde och det är inte säkert att investeraren får tillbaka hela det insatta kapitalet. Investerare bör notera att Xtrackers ETF:er och Xtrackers ETC:er inte är kapitalskyddade eller kapitalgaranterade varför investerare i Xtrackers ETF:er och Xtrackers ETC:er bör vara införstådda med möjligheten, och ekonomiskt klara av, att kunna förlora delar av eller hela det investerade kapitalet. En investering i Xtrackers ETF:er eller Xtrackers ETC:er är förknippad med risker, för en presentation av risker relaterade till investeringar i dessa fonder vänligen klicka på länken Risker och Villkor/Riskfaktorer. Vi hänvisar även till produktspecifika "Disclaimers“.


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Factor Investing: A New Era Dawns

Spotlight November 2025

Banner ETF Investment Insights

Factor investing has long underpinned systematic portfolio construction. In Europe, UCITS factor ETF assets have now surpassed sector ETFs, exceeding $80 billion in AuM — a clear sign of shifting investor behaviour. Yet, factors still account for just 5% of the overall UCITS market, leaving ample room for growth.[1]

What’s driving this change?

  • The growth of equal-weighted strategies - now representing more than a quarter of factor allocations[1].
  • The rise of Active ETFs - blending traditional factors and innovative signals.
  • Growing recognition that factor combinations can enhance—not dilute—returns[2].

Each month, we shine a light on the trends shaping ETF investing for institutional clients. This month, join our investment expert Jennifer Schmitz and explore how factor investing is evolving, why “next-generation” index strategies are gaining traction and fit into the current late-cycle market environment.

Beyond the Classics: Meet the Next Generation of Factor Signals

Today’s market demands more than the classic value, quality, momentum, minimum volatility (min. vol.) or size factors. Investors are adopting hybrid approaches that combine proven signals with new realities. Among the most prominent:

  • Market Leaders: Companies that dominate their industries and exhibit long-term competitive strength—beyond the “Magnificent 7.”
  • Growth at a Reasonable Price (GARP): Blending growth potential with valuation and quality discipline.
  • Resilient Shareholder Yield: Firms returning cash through dividends, buybacks, and debt reduction - not just “cheap” stocks.

These strategies aim to stay relevant as market dynamics shift, offering systematic exposure to durable competitive advantages.

Source: DWS International GmbH, as of October 2025.

Factors 2.0: Why They Matter

 

Beyond Momentum: Winner-Takes-All

The dominance of a handful of mega-cap stocks in the US is more than a momentum story. Leadership is driven by scale, network effects, and intangible assets—not short-term price trends. Traditional momentum models therefore often fail to capture these structural winners consistently.

Instead, systematic strategies that identify market leaders—using robust data on sustained free cash flow, high return on invested capital (ROIC), and high market share—can capture persistent advantages, even as leadership inevitably rotates.

Growth Fatigue: When Discipline Matters Most

Growth investing is as popular—and expensive—as ever. The MSCI USA Growth Index trades at nearly twice the multiple of its value counterpart, leaving room for potential disappointments[3].

Enter GARP: Growth at a Reasonable Price strategies filter for credible growth, solid fundamentals, and reasonable valuations — offering innovation without the excesses of crowded trades.

Value Reimagined: Income and Discipline Over “Just Cheap”

Value investing has struggled for years in markets dominated by structural winners (i.e. large cap tech companies), but investors are redefining the approach:

Flows into value ETFs remain strong, with yield-focused strategies gaining even more traction[4].
Dividend and buyback strategies are central, as European firms accelerate repurchases[5].
Balance sheet strength matters for which debt reduction is a key signal in a higher-rate world.

The new value play? Target companies that pair reasonable valuations with disciplined capital allocation, distinguishing sustainable value from speculative recovery bets.

Why Now? The Late-Cycle Playbook


When growth slows and volatility rises, certain factors historically tend to stand out. While the last two Spotlights focused on the Size Factor (Small Cap and Equal-Weight strategies), there are further alternatives to diversify equity going forward:

Market Leaders

Why? These firms tend to maintain pricing power and profitability even as growth slows and uncertainty rises due to durable competitive advantages. Market Leaders offer significant exposure to the Magnificent 7 but are more diversified (see chart below).

Growth at a Reasonable Price (GARP)

Why? Balances credible growth with valuation and quality filters, avoiding extremes of speculative hype and deep-value traps. This selectivity is critical when growth premiums are stretched. Back-tested GARP indices show these portfolios capture more upside and limit drawdowns, making them attractive in more volatile late-cycle markets[6].

 

Quality and Resilient Shareholder Yield

Why? Companies with strong balance sheets, high returns on capital, and disciplined capital allocation—through dividends, buybacks, and debt reduction—have historically outperformed in uncertain markets. These “quality” and “shareholder yield” factors provide downside protection and steady income[7].

Minimum Volatility

Why? Minimum volatility strategies aim to reduce drawdowns and deliver steadier returns when markets turn choppy. By overweighting defensive, rate-sensitive sectors like utilities, healthcare, and staples and underweighting high-beta cyclicals, Min Vol portfolios historically outperform during volatility spikes and benefit from easing monetary policy[8].

Factors 2.0 as a diversification tool

Next gen” Factor indices have lower exposure to the Magnificent 7

Source: DWS International GmbH, index data from S&P Dow Jones Indices, as of 30/09/2025. This information is intended for informational purposes only and does not constitute investment advice, a recommendation, an offer or solicitation. Allocations are subject to change without notice.

In Summary

Factor investing is evolving. By combining new signals with proven approaches, investors can build resilient, forward-looking portfolios for any market environment. Late-cycle and transition phases typically reward discipline and selectivity[9]. Defensive factors like Quality and Minimum Volatility, along with next-gen strategies such as Market Leaders, GARP, and Defensive Shareholder Yield, are well-positioned to navigate higher volatility—while pure momentum and high-beta growth may struggle when risk appetite wanes.

Risks to the view:


Systemic shocks—such as recessionary pressures or geopolitical dislocations—trigger broad risk-off sentiment, with equities typically bearing the brunt. Defensive sectors may underperform if inflation reaccelerates or central banks turn more hawkish. Market leadership can rotate quickly, especially if investor sentiment shifts toward cyclical or speculative growth.

Key Risks:


The value of your investment may go down as well as up and past performance does not predict future returns. Investor capital may be at risk up to a total loss. Funds are exposed to the currency markets which may be highly volatile. Large price swings can occur in such markets within very short periods and may result in your investment suffering a loss. The value of an investment in shares will depend on a number of factors including, but not limited to, market and economic conditions, sector, geographical region and political events, These Funds follows a rules-based strategy which will deviate from the overall market or parent index. Your investment is likely to be less diversified and there is no guarantee that the index’s ‘rule.