The latest FTSE Russell Smart Beta report, Smart Beta: 2015 Global Survey Findings from Asset Owners, found that for strategic allocations of smart beta, ETFs are in demand among respondents with less than USD1 billion in assets under management.
Managing assets internally meanwhile, is of interest to those with more than USD10 billion in assets under management.
The report defines “smart beta” as a term often used to define a broad range of investment strategies that are generally categorized by two types of exposures: strategy-based and factor-based. The report says: “Strategy-based exposures have gained a lot in popularity over the past few years. They are typically non-cap weighted, such as equal-weight or fundamental weight indexes. Factor-based exposures seek to achieve a systematic source of return by capturing similar factor characteristics, such as momentum or low volatility. Passively managed products based on these smart beta indexes offer investors new ways to tailor their exposures to specific market segments, portfolio risk and investment beliefs.”
The report found differences between the findings of the 2014 report and the 2015 edition. In 2014, 40 per cent of the survey respondents with an allocation to smart beta had allocated 5 per cent or less, while in 2015, only 24 per cent have allocated 5 per cent with 55 per cent allocating more than 10 per cent to smart beta strategies.
The report also found that the number of asset owners using multiple smart beta strategies has grown. In 2014, 59 per cent of the asset owners responding to the survey are using more than one strategy; in 2015, 71 per cent are using more than one strategy, and 22 per cent of those respondents are using four or more strategies.
The report says: “These differences highlight not only a growing allocation to smart beta strategies, but also a movement toward combining multiple factor and strategy indexes. The results of our new survey demonstrate increased interest in and adoption of smart beta strategies among institutional asset owners and underline the need for further education, information and advice. Smart beta indexes have given asset owners and their consultants more choice and greater flexibility in the construction of portfolios
with an outcome-oriented focus.”