The so-called smart-beta exchange traded fund segment of the market is becoming a booming industry. But what does the space cover?
ETF Trends’ Tom Lydon sat down with Dan Draper, Managing Director of Global ETFs of Invesco PowerShares, at the Charles Schwab IMPACT 2013 conference in Washington, D.C. to discuss the smart-beta, “fundamental” indexing ETF investment tool.
Some have argued that smart-beta indexing is anything non-market-cap weighted, but there are various ways to achieve different strategies. Specifically, Draper points to three broad definitions:
- Single factors. This includes low-volatility and high beta, “single factors that can really help asset allocators build more efficient portfolios,” Draper said.
- Multiple factors. As the name suggests, this methodology includes combining various factors into one investment. “That’s where particularly the Research Affiliates, or RAFI brand, comes in,” Draper added. For instance, RAFI selects and weights stocks based on cash flow, book value, sales and dividends.
- Intelligent indexing. Intelligent indexing includes the partnership with Deutsche Bank, with their commodities, or forward roll, ETFs.
Watch the video below to see the full interview with Dan Draper.
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