Market capitalization-weighted indexing methodologies have been around for years, and it is only recently that alternative or smart beta index-based exchange traded funds have gained in popularity as investors and financial advisors seek to diversify into factor-based strategies.
ETF Trends publisher Tom Lydon spoke with Henry Fernandez, Chief Executive Officer at MSCI, and Jana Haines, Head of Equity Index Products for the Americas MSCI, at the Inside ETFs conference that ran Jan. 22-25, 2017 to talk about the innovations in the indexing process.
“We continue to be excited about the globalization of investing,” Fernandez said. “I mean that in this day and age with so much attack on globalism, I don’t think that’s going to affect the global investing in the world. We are also excited about a lot of the work we’re doing on ESG – environmental, social, governance criteria – and investing process, and that’s probably better defined as long-term investing. Of course, you know, we’re very, very keen on working pretty hard on a lot of innovation in the smart beta or what we call factor investing space.”
Unlike traditional beta index investments that rely on market capitalization weighting methodologies, the rapidly growing smart beta or factor investing indexing methodology rely on disciplined screening and weighting process.