Smart beta or alternative index based investment strategies in the exchange traded fund universe have been a huge hit with market participants and may continue to become a big component in many more investor portfolios.
According to a new FTSE Russell survey, Smart beta: 2017 global survey findings from asset owners, the percentage of asset owners reporting an existing smart beta index allocation has hit a new peak of 46%, compared to 36% last year, revealing a trend that shows increasing global growth and adoption of smart beta continuing into 2017.
The survey’s findings also suggest that the number of asset owners looking into smart beta remains robust and is made up of first-time evaluators, re-evaluators and asset owner’s considering adding onto their existing smart beta positions.
While costs remain a big factor in the ongoing shift into low-cost, index-based ETFs, many surveyed smart beta investors are also looking at these products to enhance returns and better manage risk.
Smart beta investors are also increasing their allocations in multi-factor combinations as these multi-factor indices are the most widely evaluated. Nevertheless, investors still favor some single-factor methodologies, such as value and low-volatility.
More are looking back into smart beta strategies after the financial industry conducted a blitz in education. According to survey findings, 75% of respondents pointed to an increased understanding through new information and education as the main reason for evaluating smart beta strategies again, followed by new types of smart beta strategies, broader industry acceptance and longer track record.