Smart Beta ETFs Allow Money Managers to Bring Established Strategies to Market

The underlying customized FTSE Russell indexing methodology selects components based on a diversified set of factor characteristics, such as relative valuation, price momentum and quality. The enhanced indexing process would allow the ETFs to exclude expensive, low quality companies with poor momentum, which could help the ETFs diminish drawdowns without sacrificing too much from any potential upside of a market recovery.

Through these alternative or smart beta indexing methodologies, ETF providers like J.P. Morgan are able to combine actively managed styles with a passive index-based ETF wrapper.

“That’s really what we’re focused on is bringing product choice to market,” DelSignore said. “We hear that from clients. We don’t want to put product in market for products sake. We want to be able to listen to our clients, understand what their needs are and bring those products that can leverage the capabilities of J.P. Morgan to the marketplace to try to solve problems for our clients.”

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