For example, among the smart-beta ETFs that recently came to market, the iShares FactorSelect MSCI USA ETF (NYSEArca: LRGF) and SPDR MSCI USA StrategicFactorsSM ETF (NYSEArca: QUS) have been excellent ways to capture core U.S. market exposure. As opposed to traditional market cap-weighted index funds, the two smart-beta offerings focus on quality and value. Additionally, QUS includes low volatility and equal-weight styles while LRGF incorporates momentum and size factors.
Not to be left behind, traditional mutual fund providers have also stepped into the ETF arena with smart-beta offerings. For instance, the Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (NYSEarca: GSLC), JPMorgan Diversified Return US Equity ETF (NYSEArca: JPUS) and John Hancock Multifactor Large Cap ETF (NYSEArca: JHML) all screen for specific market factors.
JPUS focuses on quality, value and momentum attributes. GSLC targets low-volatility along with the same three factors as JPUS. JHML focuses on size, value and quality.
“We expect 2017 will be a year when more advisors seek out multi-factor ETFs that feel more like active management than IVV and its market-cap weighted peers, but are cheaper than the 1.1% for a large-cap mutual fund. If they do, we hope they finish their homework and look inside the portfolios first,” Rosenbluth added.
For more information on multi-factor strategies, visit our smart beta category.