Exchange traded funds allow investors to cheaply and easily access widely observed benchmark indices and markets. As investors grow more sophisticated, more are turning to the next evolution in passive index funds: smart beta.
ETF Trends publisher Tom Lydon spoke with Abby Woodham, ETF Strategist for Deutsche Asset Management, at the 2017 Morningstar Investment Conference in Chicago April 26-28 to talk about multi-factor, smart beta strategies in the ETF space.
Woodham pointed out that the first evolution of smart beta began with single factor strategies, such as value, momentum and low volatility. As investors grow more comfortable with ETFs and the various investment styles available, more clients are asking for cheap ETF portfolios that combine these various factors into a multi-factor strategy, which many actively managed funds already implement.
“When you construct a multi-factor strategy, you essentially have two choices: You could construct a portfolio of four or five single factor ETFs or one ETF that combines all the factors together,” Woodham said. “We call that latter one the comprehensive factor approach. That’s how we construct our ETFs.”