“We advocate against an overconcentration to market-cap-weighted ETFs: too many eggs in too few baskets,” Genoni said. “There are many products to consider including new, alternatively weighted strategies in ETF format that can better help investors achieve their objectives.”
Legg Mason could soon enter the ETF game with four smart-beta offerings. The money manager is current working on the the Legg Mason Developed ex-US Diversified Core ETF, Legg Mason Emerging Markets Diversified Core ETF, Legg Mason US Diversified Core ETF and Legg Mason Low Volatility High Dividend ETF. [Legg Mason Crafting Four Smart-Beta, Index-Based ETFs]
ETF investors also have a growing number of options to choose from. For example, single-factor strategies, like low-volatility, help tactical traders to tailor exposures and implement specific views or control portfolio exposure. Additionally, multi-factor strategies, such as those provided by Research Affiliates and its fundamental indices, provide a more broad or diversified approach. There are currently 494 enhanced index-based U.S.-listed ETFs with $230.7 billion in assets under management, according to XTF data. [Rapid Growth in the Smart-Beta Index ETF Space]
For more information on alternative index-based strategies, visit our smart-beta category.
Full disclosure: Tom Lydon’s clients own shares of QQQ.
Max Chen contributed to this article.