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It's Not Surprising That These Are 2016's Most Popular Smart Beta ETFs

by
May 27, 2016 8:13 am
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Data out earlier this week, courtesy of index provider FTSE Russell confirm that professional money managers are increasingly turning to smart or strategic beta exchange traded funds. That is not surprising as various data points and studies in recent years have confirmed as much.

 

Not to mention the fact that smart beta ETFs are growing a pace that is far more rapid than the fast-growing broader ETF industry. Nor is it surprising what type of smart beta ETFs professional investors are currently embracing.

 

When asked what types of smart beta indexes they are currently using, survey respondents cited low volatility, value and multi-factor combination indexes as most popular. Still popular but further down the list were fundamental, momentum and high quality indexes. And recent asset flows support this trend,” said FTSE Russell.

 

FTSE Russell, one of the largest providers of indexes for use with ETFs, surveyed more than 250 money managers, a combined 80 percent of which manage $1 billion to $10 billion or more than $10 billion. Nearly half of institutional investors surveyed are in North America with a third hailing from Europe.

 

Year-to-date, the iShares Edge MSCI Min Vol USA ETF (NYSE: USMV) and the PowerShares S&P 500 Low Volatility Portfolio (NYSE: SPLV), the dominant names in the low volatility ETF space, have taken in over $6.3 billion combined. 

 

Multi-factor ETFs are also increasingly popular. These ETFs expose investors to multiple investment factors to ensure that they do not miss out on potentially positive returns when one factor outperforms another.

 

A host of big-name investment firms have recently brought dozens of multi-factor ETFs to market. Dating back to late 2015, John Hancock, Goldman Sachs Group Inc. (NYSE: GS) and more recently, J.P. Morgan Chase & Co. (NYSE: JPM) and BlackRock Inc. (NYSE: BLK) have introduced new multi-factor ETFs or added to existing lineups of such funds.

 

The percentage of asset owners reporting that they are currently evaluating smart beta has doubled since 2014 and 2015 levels. This growth has come from asset owners who had not previously evaluated smart beta, as well as from asset owners who have evaluated smart beta in the past, but who choose not to implement, and who, we believe, are again evaluating smart beta,” according to FTSE Russell.

 

Fundamentally-weighted, quality and momentum funds also remain popular among users of smart beta ETFs, according to FTSE Russell data.


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