What to Expect in Strategic Beta in Today's Market

As many advisors begin to move beyond the active versus passive investing debate, a greater number are turning to strategic beta ETF strategies.

On the recent webcast, A New Way to Think About Strategic Beta, Steve Deroian, Head of ETF Strategy for John Hancock Investments, and Will Creedon, Director of Capital Markets for John Hancock Investments, discussed an approach that is closer to financial advisors’ current investment process than one might think.

“When we look at the strategic beta marketplace, what we really thought was, ‘is this passive or is it active and do we care,’” Deroian said. “And what we decided is it’s really the evolution of active management. Just like any other investment process, there are nuances you need to understand, but in the case of strategic beta, the definition is pretty straightforward: non-market cap-weighted and in an ETF wrapper.”

Financial advisors and money managers may employ a number of technical or fundamental investment styles to manage client portfolios, and these same active management styles may be found in passive, index-based smart beta ETF strategies.

For example, John Hancock offers broad smart-beta ETFs to fill out a core portfolio position, including the John Hancock Multifactor Large Cap ETF (NYSEArca: JHML), along with a suite of multifactor sector-specific ETF strategies for investors seeking to overweight targeted areas of the market.

“One of the things that we think strategic beta can do for the advisor community, is offer them differentiation,” Creedon said. “That cost pressure that we’ve seen in the industry is one that’s a direct result of commoditization of technology, of asset allocation, and all types of different flavors of commoditization.