“The current amount invested in smart beta funds is tiny!” Ang exclaimed.
Factor-based strategies may be better able to invest any new fund asset inflows without unduly affecting the prices of their underlying securities, providing them the potential to accommodate greater inflows in the years ahead.
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Moreover, factor-based investment strategies are not anything new as many actively managed funds and institutions follow these factor-based screens even if they do not explicitly allocate to smart beta or factor strategies. According to BlackRock data, of the trillions of dollars in U.S. active mutual funds, static factor exposures may represent well over $2 trillion in assets under management.
“In other words, money is already following these factor strategies; what is changing is the way investors are accessing those factors,” Ang said.
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