Smart beta ETFs have seen $45 billion in net inflows globally year-to-date and are on course for a record year, compared to the $30 billion added for all of 2015, writes Andrew Ang, Head of Factor Based Investing Strategies at BlackRock, in a note.
Related: A Growing Batch of Momentum ETFs
Supporting the ongoing growth in smart beta strategies, factors such as quality, momentum, value, size and minimum volatility have been drivers of returns across asset classes and helped shore up shortcomings of traditional market cap-weighted index funds.
“Unless there is a dramatic shift in the remaining days of 2016, MSCI Momentum Index will most likely underperform large-blend stocks in 2016. It is an interesting observation that the Momentum strategy underperformed in the years following a significant market pullback or sluggish return (02-03, 05-06, 08-09 and 11-12). It takes a two-year cycle for the Momentum Index to start outperforming again after experiencing a negative period,” according to Seeking Alpha.
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