Expanding the growing group of smart-beta strategies, exchange traded fund providers are crafting multi-faceted funds with a medley of investment factors to help investors stay ahead of the markets.
For instance, Global X recently launched its suite of so-called scientific beta ETFs that are based off Edhec-Risk Institute indices that utilize multiple factors, including low-volatility, momentum, size and value.
The recently launched ETFs include the Global X Scientific Beta US ETF (NYSEArca: SCIU), which tries to outpace cap-weighted indices with less volatility, Global X Scientific Beta Europe ETF (NYSEArca: SCID), Global X Scientific Beta Asia ex-Japan ETF (NYSEArca: SCIX) and Global X Scientific Beta Japan ETF (NYSEArca: SCIJ). [Beta Gets Scientific With These new Global X ETFs]
BlackRock (NYSE: BLK) iShares also bolstered its smart-beta lineup with a group of FactorSelect MSCI ETFs, including the iShares FactorSelect MSCI USA ETF (NYSEArca: LRGF), iShares FactorSelect MSCI USA Small-Cap ETF (NYSEArca: SMLF), iShares FactorSelect MSCI International ETF (NYSEArca: INTF), iShares FactorSelect MSCI Intl Small-Cap ETF (NYSEArca: ISCF) and iShares FactorSelect MSCI Global ETF (NYSEArca: ACWF). [BlackRock Bolsters Smart Beta Lineup With Five New ETFs]
The new FactorSelect ETFs also track smart-beta indices that select components based off four factors, including quality, momentum, value and size.
Through a multi-factored approach, these new smart-beta ETFs try to deliver enhanced returns and maximize diversification in an attempt to provide potentially improved risk-adjusted returns, compared to traditional market-capitalization-weighted indices.
Specifically, some argue that cap-weighted indices may put an investor at risk of chasing a rally since the best performing stocks would gain the most assets and typically have the largest weight in an index.