Smart Beta ETFs: Bridging the Gap Between Active and Passive

Investors who are considering ways to diversify an investment portfolio should consider smart beta exchange traded funds that combine the best of historically backed active styles with the efficient and cost-effectiveness of a passive index-based product.

“By combining active and passive investment techniques, smart beta seeks to take advantage of market inefficiencies in a rules-based and transparent manner,” according to New York Life MainStay Investments, IndexIQ.

Financial advisors can also learn more about IndexIQ’s insights at the upcoming virtual conference. On March 14, 2018, ETF Trends will be hosting its annual Virtual Summit, an online virtual conference environment where financial advisors can learn about current ETF issues, hear from industry experts and connect with peers without the burden of cost and traveling.

2018 ETF Trends Virtual Summit returns Wednesday, March 14! Earn 5 CE Credit – click to register!

Specifically, smart beta ETFs, like traditional passive funds, passively reflect the performance of an underlying index. However, the new breed of smart beta ETFs track a rules-based indexing methodology that is reminiscent of the actively managed investment approach that tr8ies to exploit profitable positioning.

The strategies are designed to take advantage of inefficiencies created by traditional market capitalization-weighted indices. One approach used by smart beta ETFs centers on investment factors, which try to contribute to the potential outperformance of a broad index while maintaining its passive indexing methodology.