Essentially, the new line of smart-beta ETFs provides a good middle ground between traditional beta-index funds and active products, incorporating active strategies within a benchmark index.
“As you move into the realm of multi-factor strategic beta, you’re starting to combine them in a manner that has performance attributes similar to traditional active management,” Ben Johnson, director of passive fund research at Morningstar, said in the article.
Additionally, with some factor-based index ETFs posting longer track records. More advisors are beginning to add these smart-beta ETFs in strategic, core positions.
“What you end up seeing with the fundamental strategies is that the longer the time horizon, the higher the frequency for excess return,” John Feyerer, vice-president of product strategy and research at PowerShares, said in the article. “We clearly position this as a core holding.”
For more information on ETF indices, visit our indexing category.
Max Chen contributed to this article.