While attending the 2019 Schwab IMPACT conference in San Diego, ETF Trends CEO Tom Lydon spoke with Michelle Fuller, Head of ETF Distribution at John Hancock Investment Management, about multi-factor ETFs.

This conversation focused on the many choices currently available in the bustling ETF space. Specifically, Lydon focused on the difference in 2019 flows on the equity side compared to traditional and intelligent indexing.

Fuller said the multi-factor factor space, which is John Hancock Investment Management’s big focus, has seen increased flows as investors are looking to differentiate from cheap beta. More specifically, the year-to-date flows show ETF assets sit in the cheap beat at around 19%, while assets in the single factor space sit at about 23%. Meanwhile, multi-factor is trumping both at about 30% of the flows seen YTD.

Lydon said investors are becoming more discerning about their portfolio strategies, but also advisors have something to talk to their clients about, and how it’s essential to make sure there’s some rhyme and reason to the structure, as opposed to an index that’s been around for 50 years.

Fuller agreed, but added how, “In other portions of the client’s portfolio, the need for intelligent indexing and the need for multi-factor investing definitely is warranted and that pay up scenario is warranted as well.”

Going Other Dimensional

Lydon said John Hancock Investment Management’s model is unique in that it selects managers outside of their company to help with strategies, with one of the biggest suites managed by Dimensional Fund Advisors, a popular name among many advisors.

“Our ETF lineup just aligns exactly with our John Hancock platform,” Fuller said. “We find best-of-breed, sub-advisors to fill a particular asset class in a particular wrapper as we thought about launching our ETF suite, who better than Dimensional Fund Advisors in the multi-factor space to deliver those products again in that ETF wrapper to investors. So, Dimensional offers several mutual funds under their brand, and this is a way to access Dimensional in an ETF wrapper.”

Lydon noted how it is great to have factor strategies in so many different asset classes, which is something to think about today, as investors, advisors, and firms go into possible uncharted waters when it comes to 2020. This means putting more thought into allocation.

As Fuller noted, its ETFs are offered through core strategies in the large, mid, and small-cap spaces, as well as the developed international and emerging market spaces. They also provide ten sector multi-factor ETFs as well, all sub-advised by Dimensional Fund Advisors.

Watch Tom Lydon Interview Michelle Fuller

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