Strategic beta or smart beta exchange traded funds that seek the premium of a single factor have gained in popularity, but they may complicate investors’ pursuit of alpha, diversification, and portfolio stability.
On the upcoming webcast (available for CE Credit), Just the Facts on Single Versus Multifactor ETFs, Michael Stephens, Portfolio Consultant at John Hancock Investments, and Wes Crill, Vice President, Research Group at Dimensional Fund Advisors, will discuss how mixing a variety of single-factor approaches can produce unintended consequences, such as exposure overlaps, higher costs, and style drift, raising risks in investors’ portfolios.
Alternatively, ETFs that combine multiple factors can help smooth out the ride and still help investors capture any upside potential. For instance, John Hancock offers broad smart-beta ETFs to fill out a core portfolio position, including the John Hancock Multifactor Large Cap ETF (NYSEArca: JHML) and John Hancock Multifactor Mid Cap ETF (NYSEArca: JHMM), along with a suite of multifactor sector-specific ETF strategies for investors seeking to overweight targeted areas of the market.
The John Hancock Multifactor ETFs track indices developed by Dimensional Fund Advisors, which act as the subadvisor to the funds.