Polefrone also pointed out that securities firms have been acquiring a lot of smart beta ETFs. These smart beta or alternative index-based ETFs track specific factors in an attempt to outperform traditional market capitalization-weighted indices.
The smart-beta ETFs are one of the fastest growing areas of the ETF industry. For instance, currency-hedged ETFs that try to diminish currency risk with investing in overseas markets have been a popular play this year due to the strengthening U.S. dollar and weakening foreign currencies. [The Growth of This Currency Hedged ETF is Simply Stunning]
“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. [This ETF Helped Start the Smart Beta Phenomenon]
Nevertheless, the mutual fund industry still overshadows the fledgling ETF industry. Retail investors held about $4.84 trillion in mutual funds, compared to $1.39 trillion in ETFs.
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.