Traditional market cap-weighted bond funds would weight holdings based on indebtedness, so issuers with more debt have a larger weight.

“We have seen interest from income-hungry investors looking for slightly more risky strategies, but also on the defensive side with clients looking for qualitative measures to weight debt issuers, instead of just allocating to the most indebted sovereign or company,” Vincent Denoiseux, head of portfolio solutions at DWS, told the Financial Times

Nevertheless, the uptake for smart beta bond ETFs remains slow. Felix Goltz, research director at Edhec-Risk, argued that investors are concerned that methods developed for the application of smart beta in equity strategies may not translate into fixed income.

For more information on the fixed-income market, visit our bond ETFs category.