More recently, Columbia Threadneedle launched the Columbia Diversified Fixed Income Allocation ETF (NYSEArca: DIAL), which follows an alternative indexing methodology to potentially help bond investors generated improved returns and diminish the negative effects of sudden risks. The new bond ETF tries to reflect the performance of the Beta Advantage Multi-Sector Bond Index, a rules-based multi-sector strategic approach to debt market investing. The underlying smart beta index covers six sectors of the debt market, focusing on yield, quality and liquidity.

“Strategic beta for Columbia Threadneedle is really about isolating the factors that have contributed to the most to performance and offering that in a cost-efficient ETF structure,” Zeitoun added.

These alternative or smart beta index-based ETFs allow investors to make up for the potential risks associated with traditional beta index funds that weight components by market capitalization, which may cause investors to lean heavily toward the largest components or tilt toward more expensive areas of the market.

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