Hedge funds have also utilized ETFs, with hundreds of hedge funds holding smart beta ETFs in their portfolios, and the pace does not seem to be slowing.
Related: Don’t Overlook International Smart Beta ETFs
There are now hundreds of smart beta or factor-based strategies available, ranging from minor tweaks on existing broad-based indices to more customized options that capture returns from specific styles or asset categories.
As more consider smart beta options in an increasingly expanding ETF universe, it is important to take the time to carefully consider the underlying factors that help the smart beta ETF do what it promises to do. This way investors will better manage expectations and help grow their portfolios in the time-frame they are comfortable with.
“This isn’t really about a handful of approaches being ‘best’ or ‘right,'” Bruno added. “It’s about understanding what’s on offer and using the best available tools to find solutions and construct portfolios to meet investors’ goals. If the rapid rise of these funds is any indication, it’s clear that everyone from financial advisors to pension plan sponsors has found them to be useful. Advisors and their investors should take time to assess the role smart beta can play in their portfolios as well.”