Smart Beta ETFs Are on Institutional Investors' Radar

Smart beta or alternative index-based ETF strategies have quickly grown as institutional investors begin to adopt the various methodologies in an attempt to enhance their portfolios or better manage risks.

FTSE Russell’s recently conducted its fifth annual global institutional asset owner smart beta survey and tried to find insights into major investment trends over recent years around the awareness and popularity of smart beta index-based investments among global institutional investors.

“While some results from this year’s survey serve to reconfirm long-term growth in awareness and usage of smart beta indexes, others highlight areas that are continuing to emerge. Notably, awareness and usage of multi-factor and ESG smart beta indexes are growing in recent years. And our survey notes some differences between investors across markets, specifically the US, UK and Canada,” Rolf Agather, Managing Director of North America Research, FTSE Russell, said in a note.

According to its recent findings, 91% of asset owners globally have included smart beta allocations, have evaluated or are planning to evaluate smart beta over the next 18 months. Among those with an existing smart beta allocation, 65% are evaluating additional allocations, and 37% of asset owners who had previously evaluated smart beta and decided not to invest are currently re-evaluating their options.

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