Multi-Factor ETFs are on the Rise

Multi-factor exchange traded funds, or those ETFs offering investors exposure to multiple investment factors, are increasingly popular with advisors and investors. Some big-name investment houses are seizing upon that theme as highlighted by the spate of new multi-factor product launches over the past year.

For instance, John Hancock offers broad smart-beta ETFs to fill out a core portfolio position, including the John Hancock Multifactor Large Cap ETF (NYSEArca: JHML) and John Hancock Multifactor Mid Cap ETF (NYSEArca: JHMM), along with a suite of multifactor sector-specific ETF strategies for investors seeking to overweight targeted areas of the market.

Related: ETFs Are a Hit Among Financial Advisors

The John Hancock Multifactor ETFs track indices developed by Dimensional Fund Advisors, which will act as the subadvisor to the funds.

“There are almost 200 multifactor ETFs on the market, with total assets of $36 billion, according to Morningstar. More than a third were launched just in the past year,” reports Chris Dieterich for Barron’s.


Cap-weighted indices may also expose investors to other fundamental risks as the weighting methodology would attach more weight toward indebted countries or companies Multi-factor benchmarks attempt to avoid such problems. Frequently used factors in multi-factor indexes include, value, growth, quality and low volatility.