Johnson, Lydon Discuss Currency Hedged, Smart Beta ETFs

Morningstar Director of Global ETF Research Ben Johnson joins ETF Trends publisher Tom Lydon from the Morningstar Investment Conference in Chicago to discuss trends in the ETF industry and increased advisor adoption of ETFs.

Johnson notes that advisors are employing both active and passive strategies in client portfolios, noting that advisors aren’t making distinctions between active and passive. Rather, advisors are enjoying the fact that they have bigger, more cost-effective toolkits, he said.

Johnson also highlighted this year’s massive inflows to currency hedged ETFs, but he encouraged investors to be cautious of that trend.

“These are trades that have worked of late and people have been piling on to the tune of billions of dollars,” he said. “I don’t think this is reflective of a regime change, a sea change in terms of how advisors are thinking about how to manage foreign currency in client portfolios. I think it’s really just performance-chasing. This is a hot trade and what’s worked lately.”

Three of the top 10 asset-gathering ETFs this year are currency hedged funds.

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