At the end of last year, smart and strategic beta or factor-driven exchange traded funds accounted for nearly 20% of total industry assets. With more advisors and institutional investors adopting these ETFs, that percentage is likely to grow.
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.
Strategic beta ETF assets are on the rise and so are the number funds dwelling in this space. Whether they are factor-based funds or ETFs rooted in dividend strategies, scores of the more than 160 new ETFs that have come to market this year adhere to something other than traditional market cap-weighted methodologies.
With the number of strategic beta offerings expanding at a rapid clip, investors should remember that their application of these funds is equally as important as the fund’s themselves. As Ritholtz Wealth Management Director of Research Michael Batnick notes, some of the most popular smart beta strategies do work, but investors also have a tendency to chase some of these strategies at inopportune times.
With that important advice in mind, we take a look at some of the overlooked, though still compelling strategic beta ETFs on the market today.