How can investors retain global equity exposure while diversifying their sources of return? For Philipp Graf von Königsmarck, Deputy Head of Wholesale, Europe at L&G Asset Management, this question is reshaping how investors approach their core portfolios. The L&G WTW Global Equity Diversified ETF seeks to address it by combining exposure close to the MSCI ACWI with three complementary factors: Value, Quality and Momentum.
From Owning the Market to Diversifying Return Drivers
Historically, core equity allocations have largely been built around replicating broad market indices. While this provides exposure to global markets, investors are increasingly looking for ways to introduce additional sources of return.
According to Philipp Graf von Königsmarck, interest is growing in strategies that complement passive market exposure with a more balanced mix of return drivers. The intention is not necessarily to abandon an MSCI ACWI-type allocation, but to make that core work harder.
The focus is therefore on enhancing the core while preserving its role as a source of broad global exposure. Investors want to continue participating in global equity markets, with a portfolio construction approach that goes beyond straightforward index replication.
A “Core Plus” Approach Built Around Three Factors
This is the rationale behind the L&G WTW Global Equity Diversified ETF. Its philosophy is to retain the characteristics investors expect from a global equity core while systematically introducing three investment factors: Value, Quality and Momentum.
Value seeks companies trading at attractive valuations. Quality focuses on stronger, more resilient businesses. Momentum captures companies benefiting from positive market trends.
Together, these factors provide the “plus” component: a diversified source of return potential intended to enhance long-term outcomes while maintaining exposure close to the global equity market represented by the MSCI ACWI.
Rather than taking large active positions away from the market, the strategy aims to create a better-balanced mix of return drivers within the equity core.
Combining Styles Rather Than Predicting the Next Winner
The decision to combine these three factors rests on a central conviction: no single factor consistently works in every market environment.
Attractively valued companies, businesses with stronger quality characteristics and stocks benefiting from positive trends behave differently across market cycles. Combining them therefore reduces reliance on any one investment style.
Instead of trying to predict whether Value, Quality or Momentum will lead the next phase of the market, the strategy maintains exposure to all three.
For Philipp Graf von Königsmarck, this is particularly relevant to a core allocation, where diversification and consistency in portfolio construction matter more than making a concentrated factor call.
WTW, MSCI and L&G: Complementary Expertise
The strategy brings together distinct capabilities. WTW Investments contributes the investment philosophy and expertise behind the diversified factor approach. MSCI constructs the index underlying the ETF, while L&G provides its experience in ETF construction and management.
Systematic stock selection takes place within a broad global equity universe, incorporating Value, Quality and Momentum alongside portfolio and risk constraints.
The objective is to introduce differentiated sources of return without losing the characteristics of a global equity allocation. Portfolio construction combines systematic factor-based stock selection with portfolio and risk constraints, while seeking to retain the characteristics of a global equity core.
L&G also positions the ETF as a way to make institutional investment expertise accessible at a competitive cost, an important consideration for a strategy designed to sit at the centre of a portfolio.
Incorporating the Carbon Objective into Portfolio Construction
The strategy also incorporates a target to reduce carbon intensity by 50% by 2030.
For L&G, sustainability and investment performance are not separate objectives. The aim is to incorporate sustainability considerations while preserving the strategy’s fundamental role as a global equity allocation.
The carbon-intensity objective is integrated into portfolio construction alongside factor exposure and diversification objectives. The intention is to achieve a meaningful reduction in carbon intensity while retaining broad equity exposure and the strategy’s systematic Value, Quality and Momentum characteristics.
This approach reflects evolving expectations of the equity core: continued access to global markets, combined with closer attention to the sources of return, the balance between investment styles and the environmental characteristics of portfolio holdings.
