Alternative Weighted Index ETFs Attract Heavy Inflows: Schwab

Investors continued to jump into exchange traded funds for access to the various market segments, notably alternative weighted funds, Schwab says.

According to a Charles Schwab note, ETF assets custodied at Schwab increased 23% year-over-year, slightly higher than industry growth.

Among the various ETF products available, alternative weighted ETFs accounted for a robust 29% of inflows over the past year, attracting 39% of retail trader flows, 31% of RIA clients and 25% of retail investors. Retail traders account for those on the “Schwab Active Trading” platform.

Alternative weighted ETFs include index-based funds that do not follow the traditional market capitalization weighted methodology.

In the second quarter, alternative weighted ETFs brought in 48% of inflows year-over-year.

For instance, dividend weighting in the second quarter saw a 35% rise in inflows year-over-year, equal-weight ETFs experienced a 19% increase and proprietary weighting increased 17%. Proprietary weighting include “enhanced” or “smart-beta” indexing methodologies that are based on active management styles. [iShares: Dividend Strategies as Rates Rise]

Additionally, investors seeking international and U.S. fixed-income ETFs mostly looked into alternative weighted ETFs. In the international equity category, ETF investors sought dividend weighted styles. U.S. fixed-income ETF investors leaned toward proprietary weightings, which mostly consisted of ultra short duration bond ETFs. [Floating Money Market NAV Makes Short-Duration ETFs Attractive]

For more information on ETF asset flows, visit our ETF performance reports category.

Max Chen contributed to this article.

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