Last year, smart beta ETFs attracted $65.1 billion in new assets, nearly double the $34.2 billion hauled in by the group in 2012. There is mounting evidence to support the notion that the smart beta or intelligent indexing boom still has plenty of room to run.
“Advanced beta strategies are playing a more influential role in some of the world’s largest portfolios. Forty-two percent of investors currently use advanced beta and another 24 percent plan to do so over the next three years,” according to a study by State Street Global Advisors, the second-largest U.S. ETF issuer.
The study, “Beyond Active and Passive, Advanced Beta Comes of Age,” indicates “seventy-five percent of the investors surveyed said that the strategies are an attractive alternative to both active and passive fund management and a powerful evolution in asset allocation strategies.”
“Advanced beta strategies play an important role in helping investors to construct holistic investment strategies while keeping risk and costs in check,” said Lynn Blake, CIO, global equity beta solutions at SSgA. “Our study found that more than half of institutional investors in North America and Europe will be using advanced beta strategies in the near future. The recent spike in equity market volatility, and a reduced appetite for active strategies, may encourage further adoption of advanced beta based on its track record of improving risk adjusted returns.”
SSgA’s smart beta findings jibe with those of rival ETF issuers.
Earlier this year, Cogent Research and Invesco’s (NYSE: IVZ) PowerShares unit, the fourth-largest U.S. ETF issuer and one of the leading purveyors of smart beta funds, said a quarter institutional decision makers indicate they are already using smart beta ETFs, implying significant room for growth. Speaking of growth, “over the next three years, institutions plan on increasing their use of smart beta ETFs more than any other category (including market-cap weighted ETFs),” according to PowerShares and Cogent. [Strong Future Seen for Smart Beta ETFs]