Call it smart beta or alternative or intelligent indexing. Whatever jargon Wall Street deems appropriate, there is no denying funds with the “smart beta” moniker are the fastest growing segment of the exchange traded funds industry.
“Smart beta currently accounts for a sizable $75B in assets (or almost 9% of assets for US listed ETFs that provide domestic equity exposure). Given the interest in this space, we can expect this percentage to grow,” according to Aniket Ullal, founder of First Bridge Data.
Some publicly traded asset managers with significant ETF exposure are expected to benefit from the smart beta boom, including BlackRock (NYSE: BLK) and Invesco (NYSE: IVZ). BlackRock is the parent company of iShares, the world’s largest ETF issuer, while Invesco is the parent company of PowerShares, the fourth-largest U.S. ETF sponsor and the issuer behind one of the most expansive smart beta lineups. [Bright Future for Smart Beta]
“The expansion of smart beta will benefit asset managers with businesses centered around smart beta the most. Invesco’s Powershares franchise, which offers smart beta ETFs, will benefit, as will Blackrock. Guggenheim may also benefit given the majority of its ETFs are based on non-traditional indexing,” according to a research note by Moody’s Investor’s Service.
Four of the top five PowerShares ETFs in terms of assets gathered over the past year qualify as smart beta funds, a group that includes the $2.8 billion PowerShares Buyback Achievers Portfolio (NYSEArca: PKW) and the $3.2 billion PowerShares FTSE RAFI US 1000 Portfolio (NYSEArca: PRF).