Bringing you live news and features since 2006 

Morningstar launches strategic beta ETF classification system


Morningstar has launched the first strategic beta exchange-traded product (ETP) classification system, designed to help investors better identify, compare and analyse strategic beta investment products.

Ben Johnson, Morningstar’s director of manager research for passive strategies, says: “The need to define, measure, and scrutinise the strategic beta space has increased as investors have flocked to these products and they’ve grown more complex. Investors need to undertake the same degree of due diligence when evaluating strategic beta products as they would for active investment managers. We’ve created a strategic beta classification system to help investors identify the strategies that straddle the active/passive divide.”
Morningstar defines strategic beta as a class of investment products that track indexes that seek to either improve performance or alter the level of risk relative to a standard benchmark, representing a fast-growing middle ground of the active-to-passive spectrum. Morningstar Direct, Morningstar Office and Morningstar Advisor Workstation, the company’s investment platforms for institutional investors and advisors, now include the new classification system and related data points. Clients of Morningstar Data will be able to license the data points later this month.
Clients can identify, screen, and search for ETPs at three strategy attribute levels. The system first identifies strategic beta products as the investment style, then by the strategic objective of the underlying benchmark, and then the strategic objective at a more granular level. Strategy and sub-strategy classifications include:
• Return-oriented: Strategies that try to improve returns or isolate a specific source of return relative to a benchmark. The strategies include: value, growth, momentum, quality, fundamentals, dividend screened/weighted, earnings weighted, revenue weighted, expected returns, shareholder yield, and multi-factor.

• Risk-oriented: Strategies that try to increase or decrease the level of risk relative to a benchmark. The strategies include: minimum volatility/variance, low/high beta, risk weighted, risk parity, maximum diversification, and de-correlation.

• Other: A wide variety of strategies, which are not return- or risk-oriented. The strategies include: equal weighted, non-traditional commodity, non-traditional fixed income, and multi-asset.
“Our new system for classifying strategic beta investment products will help investors understand their options and make more informed investing decisions. Because strategic beta products exhibit a variety of investment styles, the Morningstar classification system can help investors compare similar strategies and evaluate investments within the context of their traditional Morningstar category,” says Johnson.
The company has also published “A Global Guide to Strategic Beta Exchange-Traded Products,” its first global landscape report about strategic beta ETPs.

Latest News

Saving and investing app, Moneybox, has doubled the number of ETFs available on the platform, in the light of ‘growing..
Global X ETFs has announced the appointment of Ryan O'Connor as its Chief Executive Officer effective as of April 8, 2024. ..
Value-driven structured credit investing firm, Angel Oak Capital Advisors, LLC, has announced the completed conversions of two of its mutual..
Confidence in the continuing strength of bitcoin and Ethereum is driving wider interest in altcoins and other digital assets, according..

Related Articles

Graham MacKenzie, Toronto Stock Exchange
The evolution of ETFs has been a multi-decade experience for Toronto Stock Exchange says Graham MacKenzie, managing director, Exchange Traded...
Frank Koudelka, State Street Global Services
ETF data provider and ETF Express data partner, Trackinsight, has published its Global ETF Survey 2024 Report: ‘50+ Charts on...
Matteo Greco, Research Analyst at Fineqia International writes that bitcoin (BTC) ended the week at approximately USD52,150, showing a notable...
US Distribution Awards trophies
The winners of the first US ETF Distribution Awards at the Exchange conference, hosted by ETF Express and sponsored by...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by