Smart Beta ETFs Help Financial Advisors Enhance Their Portfolios

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.

“Those products in particular have lent themselves to really productive conversations about portfolio construction. Not just, ‘What is your product? And how does it differ from the next product?’, but where does it fit inside my portfolio,” DelSignore added.

For example, DelSignore explained how advisors may look to something like JPIN for a smarter way to capture international stock exposure, but they would look to providers like J.P. Morgan to help explain how the new smart beta strategy can affect the overall risk return characteristics of an investment portfolio.

“One of the things that has been so exciting for us at J.P. Morgan is being able to bring J.P. Morgan’s investment capabilities – long-term investment capabilities we’ve had at the organization for many, many years – and bring that into the ETF industry,” DelSignore added.

For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category.