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PowerShares by Invesco – Best Smart Beta ETF Provider

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Dan Draper (pictured), Global Head of PowerShares by Invesco, says that winning the smart beta award in the ETF Express awards is a particular pleasure for the firm as smart beta dominates PowerShares' product line-up.

The firm now has over USD110 billion in ETFs with nearly USD47 billion in smart beta.

"Smart beta dominates our portfolios and represents our very culture," Draper says. "We were founded over 13 years ago with smart beta products. The original founders of the company looked at the passive world and wanted to take the benefits of this emerging ETF wrapper as a delivery mechanism but use the investment content of active management."

Back then the firm called it `intelligent indexing'. "Factor attribution is starting to grow, and it's in our DNA," Draper says. "This award means the most to us because it is where we were founded and where we have passion."

At a firm level, 2016 was a record year for PowerShares both in terms of asset gathering but also Draper says at the smart beta level. "If you look at our competitors, we are well diversified with smart beta products in equities, fixed income and alternatives, where we have commodities, private equity, real estate and some hedge fund like strategies, including liquid alternatives. We have a multi asset class base in smart beta."

The fastest growth has been in fixed income with the rate cycle in the US seeing rates continue to increase leading to the development of a variable rate fixed income range of ETF products.

"What's really important is that for many new issuers into the space they are reliant on back tested information and performance. PowerShares differentiates by having built up historical track records. Some 70 per cent of our smart beta ETFs have at least a live track record of five years. 

"Most larger institutional investors have an orientation around a benchmark, so we have built up scale with track record and liquidity. We now have those characteristics which mean we see more institutional take up of our smart beta products. We are also building on our smart beta range and offering single and multi-factor products, and we see more sophisticated institutions using those strategies," Draper says.

Draper says that PowerShares' view is that the smart beta segment will continue to grow at higher rates than the overall ETF industry. "It's still in the early stages," he says.

"Since the US presidential election, market conditions have changed with an expectation of future rising interest rates, and we are seeing returns dispersion increase as correlations come down among asset classes and the diversification benefits of smart beta are really showing. 

"We are seeing the return of value and small cap equities in the US which bodes well for normalising market conditions. If the US leads, Europe and the rest of the world will probably follow so there are good tailwinds for which we are well placed as we continue to innovate in our new product pipe line." 

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