Smart beta exchange traded funds that follow rules-based, customized indexing methodologies in an attempt to enhance returns and limit downside risks are quickly becoming a hot spot for new investment money.
According to ETFGI data, investors funneled $77.6 billion into smart beta ETFs over 2018, up 12.4% on the net inflows of $69.1 billion in the year prior, the Financial Times reports.
There are now 822 enhanced U.S.-listed ETFs that track indexing methodologies outside of traditional market capitalization weighting, with $759.4 billion in assets under management, according to XTF data. To put this in perspective, there are 2,265 U.S.-listed exchange traded products on the market with $3.6 trillion in assets.
Meanwhile, traditional market capitalization-weighted ETFs experienced a drop of 30.5% in net inflows over 2018 year-over-year as the equity markets experienced heavy losses amid volatile trading.