The new breed of smart-beta, index-based exchange traded funds are encroaching on traditional beta-index fund’s market space as more investors look to alternative index strategies to supplement or even replace core investment positions.
Fund sponsors are touting the new line of smart-beta index ETFs’ ability to screen for specific market factors that allow investors to take a more customized approach to the marketplace.
“What we think the opportunity is, is to use these products strategically,” David Mazza, head of research for SSgA’s SPDR ETF and mutual fund businesses, said in a Financial Times article.
State Street recently launched nine ETFs based on MSCI Qualty Mix indices that screen for quality, value and low-volatility factors. [What SSgA’s New Multi-Factor Index ETFs Are All About]
“What you get when you bring these three [factors]together is diversification because they don’t always correlate with each other,” Mazza added.
JPMorgan recently listed its first ETF, JPMorgan Diversified Return Global Equity ETF (NYSEArca: JPGE), which selects stocks based on valuation, momentum, volatility and size factors. [JPMorgan to List First ETF Tuesday]