As we and other sponsors innovate in new asset classes and strategies such as dividend growth, low-volatility, currency-hedged equities and commodities, traditional notions of passive and active become less significant as investors use these new beta exposures to create sophisticated portfolios with specific characteristics and investment objectives.
Whether driven by a “smart” index or a smart portfolio manager, the ETF is a flexible structure useful for delivering a wide variety of investment strategies.
In 2013, U.S.-listed ETFs tracking non-market-cap weighted indexes gathered $65 billion, or nearly one-third of new net inflows.1 And according to a new study conducted by Cogent Research, a division of Market Strategies International, more than half (53%) of institutional decision makers will increase their use of smart beta ETFs over the next three years—that’s more than any other ETF category, including market-cap weighted ETFs (48%).2 Terminology is debatable; the facts on the ground are not.
1Source: Dodd Kittsley, “What You Need To Know About ‘Strategic Beta,’” BlackRock, 1/15/14.
2Source: Marketwired, LP, 12/11/13.