Smart-beta strategies that try to deliver enhanced returns or diminish market risks through alternative indexing methodologies have been the hot-button topic in the exchange traded fund industry.
For instance, at the recent Inside ETF Conference, smart-beta ETFs were center stage, with analysts and industry experts pouring over the investment styles and fund sponsors promoting new options for targeted market exposure.
The increased presence of the smart-beta ETF space corresponds with the increased demand, writes Todd Rosenbluth, S&P Capital IQ Director of ETF Research, in a note. For instance, of the institutional investors who are utilizing smart-beta ETFs, 59% plan to increase their exposure to the strategies in the year ahead, according to a recent Greenwich Associates study.
Kal Ghayur, head of the ActiveBeta Equity business with Goldman Sachs Asset Management, said that institutional investors are focusing on factor-based, smart-beta strategies, pointing to the appeal of factor diversification to diminish risks of underperformance.
Established names like BlackRock’s iShares and Invesco PowerShares have expanded their smart-beta lines while traditional mutual fund players like Goldman Sachs and JPMorgan are stepping up to bat with their own offerings tied to proprietary indices. [A Closer Look at the RAFI Fundamental ETF Strategy]