“Enhanced” or “smart-beta” index exchange traded funds have attracted more attention as investors branch into alternative ways to gain market exposure, with the Invesco PowerShares Fundamental suite of ETFs recently breaking the $5 billion mark.
According to a press release, PowerShares’ line of “RAFI Fundamental” ETFs, which are based on the Research Affiliates Fundamental Index methdology, reached $5 billion in assets under management globally. [Outperforming Value ETF Uses Fundamental Screens]
“Investors are readily adopting Fundamental strategies along with low-volatility, high beta, and momentum-based ETFs as potential effective smart beta portfolio solutions,” Andrew Schlossberg, head of global ETFs, said in the press release.
Beta refers to the measure of relative risk or volatility in the marketplace. The smart beta methodology is an attempt to provide an alternative to traditional market-capitalization weighted benchmarks. [‘Enhanced’ Index ETFs That Are Outperforming the S&P 500]
The RAFI Index methodology uses four fundamental measures of company size, including book value, cash flow, sales and dividends, to select and weight index holdings.