Exchange traded funds have gravitated toward low-cost, pure beta investments for years, but many are beginning to warm up to smart beta or factor-based strategies that aim to enhance returns and limit downside risks.
“By implementing with our quantitative strategies, we believe that we are giving investors access to strategies that are low cost that is diversified but also offer a risk/reward premium above a passive market index. So, we think that’s where the market is going,” Melinda Mecca, Director of Investment Solutions, Northern Trust Asset Management, said at the Inside ETFs conference.
For example, dividend ETF investors who are seeking stability, along with exposure to the growing U.S. markets, can look to the FlexShares Quality Dividend Index Fund (NYSEArca: QDF), FlexShares Quality Dividend Dynamic Index Fund (NYSEArca: QDYN) and the FlexShares Quality Dividend Defensive Index Fund (NYSEArca: QDEF). The suite includes a group of smart-beta ETFs that focus on both quality and dividends.
Additionally, FlexShares has partnered with Morningstar in creating a line of smart beta ETFs, such as the FlexShares Morningstar U.S. Market Factor Tilt Index Fund (NYSEArca: TILT), which tries to provides enhanced exposure to U.S. equities by tilting the portfolio toward long-term growth potential of small-cap and value stocks. Additionally, for international exposure, investors can look to the FlexShares Morningstar Developed Markets Ex-US Factor Tilt Index Fund (NYSEArca: TLTD) and the FlexShares Morningstar Emerging Markets Factor Tilt Index Fund (NYSEArca: TLTE).
Watch Melinda Mecca Discuss Good Smart Beta Plays:
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