Market Overview

BlackRock Sees Smart Beta ETF Assets Reaching $2.4 Trillion by 2025


BlackRock's (NYSE: BLK) iShares business, which is the biggest manager of exchange traded funds, estimated that smart beta ETF assets would reach $1 trillion globally by the end of the current decade. According to the company's projection, it would further reach $2.4 trillion by the end of the year 2025.

BlackRock said current smart beta ETF assets were $282 billion reflecting an annual organic growth pace of 19 percent. The key factor was that it was double the growth pace of the overall ETF market. Also, minimum volatility and factor in respect of multi and single funds were expected to be important drivers of future growth and accounted for more than 60 percent of new smart beta flows through 2025.

BlackRock's Head of U.S. iShares, Martin Small, said, "Smart beta ETFs are growing increasingly popular, as evidenced by their record flows in 2015 and the first quarter of 2016 with investors using them to manage risk and obtain precise exposure to historically return driving factors. In response to continued demand and strong expected future growth, BlackRock is introducing the iShares Edge MSCI Multifactor Sector ETFs. These funds represent the next phase of sector investing: using a factors-based approach to target companies with the potential to outperform their broader respective sectors over multiple market cycles."

He continued, "As a leader and innovator in smart beta investing, clients look to BlackRock for information and insight. In response, we've launched a range of educational tools to bring our clients greater clarity and help them to navigate the market. We've also consolidated our smart beta ETF products that provide precise factor exposures under a single, unified brand."

Similarly, Andrew Ang, who is Head of Factor Investing Strategies at BlackRock, reacted to the report and said, "The rise of smart beta - propelled by advances in technology and data analytics - is helping to democratize factor investing, putting investment solutions once only accessible to large institutions within the reach of all investors."

He added further that "Smart beta consists of long-only, benchmark driven strategies built to capture one or multiple factors while pursuing a variety of outcomes, such as reducing risk, enhancing returns or improving diversification. This investment style is predicated on the understanding that the risks and returns of all investments, no matter how nominally diverse, can be mapped to a common set of underlying factors. Today, these factors can be captured with cost effective and efficient smart beta ETFs."

BlackRock said that Smart beta ETFs have become increasingly popular tactics for investors seeking to manage risk and, at the same time, obtain precise exposure to historically return driving factors, and saw $31bn in new flows globally in 2015. The company said that minimum volatility ETFs were a major contributor in 2015 with over $11bn of inflows, and have led the way in 2016 with a record-breaking $12.6bn of inflows until now.

The company is also unveiling a number of initiatives to improve the smart beta investing experience taking advantage of the continued expected growth.

Posted-In: News ETFs


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