ETF Trends
ETF Trends

The relatively nascent exchange traded fund industry is still evolving, with money managers and providers coming out with increasingly more sophisticated smart-beta, index-based strategies that could provide better risk-adjusted returns than traditional beta-index funds.

On the upcoming webcast, The Evolution of Smart Beta 2.0, Alexander Channing, Director of Quantitative Cross Asset Index Strategies at ETF Securities, and Mike Cameron, Head of Institutional Sales at ETF Securities, detail the ongoing evolution of smart-beta ETF strategies and how advisors can capitalize on the new developments.

ETF Securities sees that the industry is developing smart-beta “2.0” indices as money managers and fund companies try to enhance broad exposure.

Originally, investors have relied upon market cap-weighted indices for their passive investment needs. However, these traditional beta indices were not designed to maximize investment risk versus returns. Instead, observers have pointed out that market cap-weighted indices may overexpose investors to outperforming stocks since these are the same companies that have seen their market cap grow.

After a while, smart-beta “1.0” indices came along to provide superior risk-adjusted performances, but they did not adequately address two drawbacks in market-cap weighted portfolios: a tilt toward unrewarded risk factors and lack of diversification, according to ETF Securities.

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