Now, we are seeing a growth spurt in the ETF space as more smart-beta 2.0 index-based funds come out. These ETFs track multi-factor indexing methodologies that rely on multiple empirically rewarded factors and multi-weighting strategies to potentially diminish risk and enhance returns.
For instance, ETF Securities has partnered with ERI Scientific Beta on the relatively new ETFS Diversified-Factor U.S. Large Cap Index Fund (NYSEArca: SBUS) and ETFS Diversified-Factor Developed Europe Index Fund (NYSEArca: SBEU).
Scientific Beta is an index provider specializing in smart beta solutions and is part of the EDHEC Risk Institute, an entity that works closely with institutions to implement academic research and improve their investment and risk management process. The two ETFs’ selection process includes emphasizing investment factors, such as volatility, valuation, momentum and size.
Additionally, the ETFS Diversified-Factor U.S. Large Cap Index Fund and ETFS Diversified-Factor Developed Europe Index use a proprietary weighting strategy to provide well diversified exposure, by combining 5 models: Maximum Deconcentration, Maximum Decorrelation, Efficient Minimum Volatility, Efficient Maximum Sharpe Ratio, and Diversified Risk Weighted.
Financial advisors who are interested in learning more about investing in smart-beta ETF strategies can register for the Thursday, May 5 webcast here.