More financial advisors are including exchange traded funds that track smart-beta or factor-based indexing methodologies, notably low-volatility and equal-weight strategies.

Over two thirds of financial advisors using ETFs have invested in smart-beta funds, according to FTSE Russell.

Among financial advisors, those utilizing smart-beta ETFs tend to be younger, have a higher share of assets under management in ETFs and alternative investments, and have practices that extend beyond core investment selection, asset allocation and financial planning. More than 70% of advisors who have adopted a smart-beta strategy are more likely to utilize more than one product.

“Factor-based and alternatively-weighted indexes have transformed the investment landscape,” Ken O’Keefe, Managing Director of Global ETFs for FTSE Russell, said. “Our survey results suggest that retail financial advisors are embracing investment products based on these indexes as a way of incorporating new ideas into their clients’ portfolios. Our findings indicate that retail financial advisors view smart beta as an important portfolio tool for addressing investment challenges.”

For instance, the two most popular ETFs this year are smart-beta ETFs WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) and Deutsche X-Trackers MSCI Europe Hedged Equity ETF (NYSEArca: DBEU), which have gathered about $28.2 billion in new assets. The two ETFs help investors capture overseas markets while mitigating the risks of weakening foreign currencies or a strengthening U.S. dollar. [International Equity ETFs’ Record Setting Year]

Additionally, FTSE Russell found that low-volatility and equal-weight themes are two popular smart-beta strategies among advisors. Almost half, or 48%, of surveyed financial advisors use an equal-weight index or plan to use one, and over half, or 52%, are already using or likely to use a low-volatility index.

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