“Smart beta” might be one of the most vilified terms in the history of financial markets, but vernacular aside, there is no denying exchange traded funds that follow non-capitalization weighted methodologies are gaining traction with professional investors.

The FTSE Russell Smart Beta: 2015 Global Survey Findings from Asset Owners survey indicates institutional investors are boosting adoption of smart beta ETFs.

“The 2015 results reveal a significant increase in smart beta allocation in a relatively short period of time. In 2014, 38% of the survey respondents with an allocation to smart beta index strategies had allocated 10% or more of their organization’s equity portfolio to smart beta. In 2015, more than half (55%) of survey respondents are allocating more than 10% to smart beta strategies,” according to FTSE Russell.

FTSE Russell’s findings regarding increased usage of smart beta ETFs jibes with the findings of other ETF sponsors. For example, the second annual study titled The Evolution of Smart Beta ETFs, conducted by Invesco’s (NYSE: IVZ) PowerShares unit, the fourth-largest U.S. ETF issuer, and Market Strategies International, shows that use of smart beta ETFs by professional investors continues climbing. Institutional investors, including public and private pensions, endowments and registered investment advisors (RIAs), are increasingly favoring the alternative weighting methodologies made available by smart beta ETFs.

“Overall, smart beta ETFs accounted for 17% of US net ETF inflows in 2014, despite representing less than 11% of total assets. Today there are more than 350 smart beta ETFs available in the U.S. comprising over $230 billion in AUM, up from just 212 products and $64.8 billion in 2010,” according to the PowerShares study. [Smart Beta ETFs Keep Gaining Traction]

“In 2014, 40% of the survey respondents with an allocation to smart beta had allocated 5% or less. In 2015, only 24% have allocated 5% or less; 55% have allocated more than 10% to smart beta strategies,” according to the FTSE Russell survey, which polled institutional investors with $1 billion and more in assets under management.

The “survey was conducted in January and February 2015. The 214 asset owners included in the study were drawn from North America (61%), Europe (26%), and Other Regions (13%). Almost 90% of the respondents either have direct responsibility for selecting equity investments or play roles in teams

that perform this function. The sample crosses a wide mix of organization types – corporation or private business (23%), government organization (22%), non-profit or university (14%), union or industry-wide pension scheme (13%) – and the rest is a mix of health-care organizations, insurance companies, family offices and sovereign wealth funds,” according to FTSE Russell.

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