There are currently about 480 enhanced index-based U.S.-listed ETFs on the market with $247.2 billion in assets under management and an average expense ratio of 0.61%, according to XTF data.
One of the ETFs that kick-started the smart beta movement is the PowerShares FTSE RAFI US 1000 Portfolio (NYSEArca: PRF), which celebrates its tenth anniversary in December. The RAFI strategy weights stocks based on fundamental measures, including book value, cash flow, sales and dividends, as opposed to the traditional market-capitalization methodology, which would overweight the best performing stocks.
Among factors emphasized by smart beta funds, low volatility and value were the most popular among the professional investors surveyed by FTSE Russell. Importantly, investors plan to hold smart beta ETFs for the long term.
BlackRock’s iShares also sees investors incorporating portfolios through single-factor and multi-factor strategies. Single-factor strategies help tactical traders to tailor exposures and implement specific views or control portfolio exposure. Additionally, multi-factor strategies provided a more broad or diversified approach. [How to Implement a Factor-based Smart Beta Investing Strategy]
Financial advisors who are interested in learning more about smart-beta index ETF strategies can attend the ETF Trends Virtual Summit, an online event, on January 20, 2016.