“ETFs may have been superior to mutual funds across all capacity metrics… and had an identical correlation to mutual funds,” Vannelli said.

Many investors, though, still rely on what they know, which include mutual funds that may not efficiently provide market exposure. In a survey of financial advisors on the webcast, 62% of those surveyed indicated that they still utilize mutual funds for their global allocations, and 51% said they plan on increasing their global exposure.

Given ETF’s more efficient exposure to international markets, investors may continue to slowly move toward the ETF wrapper as their go-to investment tool to access global exposure.

For example, the Gavekal Knowledge Leaders Developed World ETF (NYSEArca: KLDW) tracks international developed markets and is the first exchange traded fund based on the so-called Knowledge Effect. Since its inception on July 7, 2015, KLDW has outperformed the benchmark MSCI World Index by over 1%.

The index-based Knowledge Leaders ETFs select companies based on the innovation process and other criteria, including characteristics like intangible property as a percentage of assets, intangible investments as percentage of sales, gross margins, financial leverage, net debt as percentage of capital, operating cash flow margin, free cash flow margin and return on invested capital.

Due to its quality control, KLDW also exhibits a greater Sharpe ratio than the Morningstar category average, or a greater risk-adjusted return as the smart beta ETF provides improved diversification benefits, lower drawdowns and enhanced upside potential.

“KLDW outperformed the ETF and mutual fund Morningstar World Stock category average on every performance/risk/capacity metric,” Vannelli added.

Given its more customized indexing methodology, KLDW is similar to other smart beta ETFs in regards to their above-average fees – the ETF comes with a 0.75% expense ratio, but it is still cheaper than the broader international mutual fund category. Potential investors, though, may be relieved to know that the ETF has distributed no capital gains since inception.

* Email Cassandra Egan at cegan@etftrends.com for the link to the on-demand webcast.