Institutions Embrace Smart Beta ETFs in a Big Way

The terminology “smart beta” is one part buzzword and another part criticized investment phrase by those either fearful of or unfamiliar with smart beta’s utility with exchange traded funds.

What cannot be denied is the powerful growth of smart beta and increased usage of these ETFs by institutional investors. As of late August, assets under managements across smart beta ETFs totaled $350 billion, a 30% year-over-year increase. Much of that growth has been driven by institutional investors, including large money managers, endowments and pensions.

In Tuesday’s webcast Why Institutions are Using Smart Beta ETFs, Invesco PowerShares ETF Institutional Consultant Robert Ross and Market Strategies International Senior Director of Research Steven Sixt will discuss the growth of smart beta ETFs that now has these ETFs being used by one of every four institutional investors.

Invesco PowerShares is the fourth-largest U.S. issuer of exchange traded and one of the largest issuers of smart beta funds. Importantly, PowerShares is the issuer behind some of the most seasoned smart beta ETFs on the market today. For example, the PowerShares S&P 500 High Quality Portfolio (NYSEArca: SPHQ), which has $413 million in assets under management, celebrates its ninth anniversary in December. Five of the firm’s fundamentally-based ETFs, including the well-known PowerShares FTSE RAFI US 1000 Portfolio (NYSEArca: PRF) turned nine earlier this year. [Alternatively-Weighted ETFs Gain Supporters]

Also worth noting is that the concept of smart beta itself is not new. “While smart beta has become a buzz word, the concept is far from new. Institutional investors have used alternative weighting and factor-driven strategies since the 1970s, albeit not labeled ‘smart beta,” according to PowerShares.