Smart beta equity exchange-traded funds and products (ETFs/ETPs) listed globally gathered US$3bn in new assets in October and US$53.7bn in the first 10 months of 2015, according to ETFGI. This included 764 smart beta equity ETFs/ETPs, with 1,336 listings and assets of US$399bn, from 106 providers listed on 31 exchanges in 27 countries.
Factor investing has been around for many years but there is an increasing number of products traded on exchange that are using smart beta strategies, according to Deborah Fuhr (pictured), managing partner ETFGI. "Most of these products sit on dividend strategies, but there is a trend towards the use of multi-factor indices," said Fuhr.
There were 401 products with assets of $286.6bn tracking indices which use fundamental factors in their screening, while 144 products with $26.8bn assets follow indices with multiple factors, which could include fundamental as well as other factors, such as volatility, momentum, or where the securities are weighted by a measure other than market capitalisation.
Products which are categorised as smart beta based on the index using an alternative weighting methodology have $22.7bn assets across 84 products, while those with volatility screens have 63 products and $26.5bn of assets. There were also 28 products based on momentum strategies holding $10.6bn in assets.
"Over the last five years, 39% of total ETP assets were invested in smart beta strategies globally (34% in Europe), whereas ETP assets invested in cap weighted indices represent 18% of the compounded inflows," said Fuhr. "Our findings show that market cap equity ETFs/ETPs are still the most popular based on assets under management, where they account for $1.79tr, compared to $399.3bn invested in smart beta equity ETFs/ETPs. When compared by their five-year compound annual growth rate (CAGR) rates, smart beta equity products are growing significantly faster, at 39.3%, while market cap has been growing at 18.6%."
This year, 148 new smart beta equity ETFs/ETPs were launched by 48 providers across 33 index providers in 17 countries, while 16 products were delisted from eight different providers. iShares gathered the largest smart beta ETF/ETP net inflows in October with US$1.6bn, followed by Guggenheim Investments, with US$361m, and Charles Schwab Investment Management, with US$352m. WisdomTree Investments gathered the largest smart beta ETF/ETP net inflows with US$20bn, followed by iShares, with US$13.4bn, and Vanguard, with US$6.4bn.
Products tracking S&P Dow Jones smart beta indices gathered the largest net ETF/ETP inflows over the month with US$1.1bn, followed by MSCI with US$814m and Cohen & Steers with US$425m net inflows. This year, WisdomTree smart beta benchmarked products gathered the largest net ETF/ETP inflows with US$20bn, followed by MSCI with US$9.4bn and CRSP with US$7.3bn net inflows. There are over 500 buy-and-hold structured products linked to smart beta indices across markets with the US market accounting for the biggest portion of products linked to these strategies at a country level, followed by Finland, Ireland, and Italy.
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