As the ETF industry sees assets continue to grow among the top three largest ETF issuers, with most of the money going into passive, beta index-based products, new players that are trying to differentiate their ETFs from the first movers are increasingly pushing the boundary of IQ products like smart beta, which eschew traditional market cap-weighting methodologies in favor of factor weights. Consequently, as fund providers look to new innovative products, they are also tapping the brilliant minds to help fine tune the new batch of smart beta products.
“Academics always bring credibility to the table,” Rusty Vanneman, chief investment officer at CLS Investments, told Bloomberg. “They have always been important but probably even more so in recent years.”
Factors that combine a number of academically backed research are used to direct more than $700 billion, or 20%, of U.S.-listed ETFs, helping investors track historically relevant themes like value, growth, momentum and quality, among others.
“With what’s happening in smart beta and all of these different strategies coming to market that may or may not have merit, it’s really important that sponsors take the time to do this research,” Oppenheimer’s Haghbin told Bloomberg. “The next big innovation in smart beta could be something that was researched 10 to 20 years ago that hasn’t made it into the mainstream yet, so we want to continually have this dialogue and feedback loop.”
For more on Smart Beta ETFs, visit the Smart Beta Channel home page.