Systematic investing: the best of both worlds

In today’s increasingly complex financial landscape, investors face an overwhelming array of strategies and products, each claiming to be the ideal solution. To navigate this complexity, it’s helpful to group these approaches into three broad categories: passive, discretionary active and systematic. Understanding these classifications helps investors better grasp the philosophy and decision-making framework behind each approach.

This blog explores the systematic approach in depth — its defining characteristics, historical evolution and the key benefits it offers to modern investors.

What is systematic investing?

Systematic investing sits between traditional passive investing and fully discretionary active management. It offers an alternative that combines the potential benefits of both approaches to pursue enhanced risk-adjusted returns at a lower cost.

• Like traditional index strategies, systematic investing is transparent and rules-based, designed to methodically identify companies that exhibit predefined factor-specific characteristics.
• It also shares traits with active management, including security selection, non-market-cap-weighted methodologies, portfolio turnover and a focus on outperformance.

The evolution of systematic investing

The roots of systematic investing trace back to the mathematical foundations of modern portfolio theory in the early 1970s. Early strategies focused on tilting portfolio exposure toward specific investment attributes — known as factors — believed to reflect persistent market inefficiencies. Factors such as value, size and quality were identified through empirical research and used to capture excess returns or mitigate risk over the long term.

In the mid-2000s, so-called “smart beta” strategies gained traction. These aimed to capture factor premiums such as value, momentum, quality and low volatility — posing a direct challenge to the efficiency of traditional market-cap-weighted indexes. Critics argued that such cap-weighted indexes were prone to bubbles and crashes due to their tendency to overweight overvalued stocks and underweight undervalued ones.

Today’s systematic strategies span a broad spectrum — from simple models using readily available data to sophisticated quantitative approaches supported by teams of analysts and data scientists. These advanced strategies leverage expansive datasets, algorithms, machine learning and AI to uncover alpha-generating factors. Human judgment often plays a role in designing, refining and implementing these models.

Benefits of systematic investing

Systematic investing offers several key advantages:

1. Back-testing and optimization: models are tested using historical data and are then stress-tested across diverse market scenarios, allowing for strategic refinements to improve risk-adjusted returns.
2. Objectivity and consistency: decisions are driven by data, minimizing emotional bias and subjective judgment.
3. Transparency and repeatability: the rules-based process ensures consistent application across market conditions.
4. Diversification: systematic strategies help build diversified portfolios that capture returns from multiple market factors.
5. Customizable exposure: investors can tilt portfolios toward specific attributes they believe will enhance returns or mitigate risk.

Explore Mackenzie’s Systematic Strategies

Mackenzie Investments offers a diverse suite of systematic ETFs; each built on proprietary models and designed to deliver differentiated exposure.

For more information about these ETFs, please talk to your Mackenzie sales representative.
 

Commissions, management fees, brokerage fees and expenses may all be associated with Exchange Traded Funds. Please read the prospectus before investing. Exchange Traded Funds are not guaranteed, their values change frequently and past performance may not be repeated. 

Index performance does not include the impact of fees, commissions and expenses that would be payable by investors in the investment products that seek to track an index. 

The content of this article (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it. 

This article may contain forward-looking information which reflect our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of October 9, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.