“The smart-beta phenomenon is just an evolution of where we’ve been, and you’re going to see more of that evolution happening,” O’Keeffe said.
The original rules-based ETFs screened for high-dividend stocks, based on technical analysis and weighted companies by fundamental factors like earnings or valuations. The equal-weighting methodology may arguably be a form of enhanced indexing, as well. [What is an ETF? — Part 3: Enhanced Indexing]
Now, there is a growing subset of ETFs that offer strategy-based methodology that mimic active management but passively reflect hand-tailored indices that screen for specific qualities in an attempt to beat the market.
For instance, the underlying benchmark index may focus on factors like public company filings relative to frequency of trades, changes in holdings of company insiders and earnings analysis based on company returns.
Financial advisors interested in attending the annual virtual summit on January 15 can register at ETF Virtual Summit registration.