Smart- or strategic-beta exchange traded fund strategies that screen for individual factors or multiple factors are growing in popularity as an alternative means to access the equities market to potentially enhance returns and diminish risks.
As the U.S. heads toward the ninth year of the equity bull run, market experts will review the stock market along with the risks of being overweight in overvalued stocks in traditional market cap-weighted indices and present customized index-based alternatives that could better manage the market environment ahead on the the annual online ETF Trends Virtual Summit on February 8.
Arne Noack, Director of ETP Manufacturing at DeAM, Todd Mathias, Vice President of Franklin Templeton Investments, and Mannik Dhillon, Head of Investment Solutions, Product and Strategy at Victory Capital, will touch on potential benefits factor-based strategies may provide for a diversified investment portfolio.
Smart-beta or alternative index-based ETFs have quickly attracted the investment community’s attention and may act as major pillar of growth for the ETF industry ahead.
Along with the ability to provide broad market exposure, ETFs have also attracted a lot of attention for their specialized strategies. For example, the rapidly developing smart beta or customized, factor-based index ETFs could help investors generate improved risk-adjusted returns over the long haul – for example, the low-volatility strategy has been a popular way for investors to limit drawdowns during sell-offs while still participating in any upside potential.
Smart-beta ETF adoption has been gaining momentum among retail investors, financial advisors and even institutional investors.
A recent Journal of Financial Planning and the FPA Research and Practice Institute survey revealed that advisors are warming up to the new breed of smart-beta ETF strategies, showing 24% of advisors said they used smart beta ETFs, compared to 22% in 2015.
Retail investors and financial advisors have contributed to the first leg of the ETF industry’s growth spurt, and institutional investors could support ETF growth ahead.
According to a recent FTSE Russell smart beta survey, global institutional asset owners currently evaluating smart beta have doubled to 36% in 2016 from 15% at the first survey in 2014, and 62% of asset owners with an existing smart beta position are now considering additional allocations.
Close to 70% of asset owners also take a long view on smart beta, planning to utilize smart-beta options five years or longer to achieve their long-term investment objectives. The rising adoption reflects asset owners’ preference for return enhancement and risk reduction.
The smart beta survey of global asset owners also revealed a developing trend in asset owners’ views and usage of smart beta strategies. The percentage of asset owners that tracking five or more smart beta indices have increased significantly to 21% in 2016 from 2% in 2014.
Due to the increased usage of smart-beta strategies, we are also witnessing traditional open-end active fund managers tiptoe into the ETF industry with smart-beta options of their own.
Financial advisors who are interested in learning more about CFP/CIMA accredited panels on the online conference can register for the February 8, 2017 ETF Trends Virtual Summit.