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Towers Watson clients change strategy
19 February 2014
Smart beta assets double in 2013
sovereign wealth funds
Towers Watson's clients made over twice as many new investments
in smart beta strategies during 2013 - around $11bn across over
180 portfolios - compared to 2012 according to global data from
the company. Institutional investment clients globally have now
allocated more than $32bn to smart beta strategies for almost
500 portfolios across a range of asset classes.
Craig Baker, global head of investment research at Towers
Watson said, "It is no surprise to us that smart beta
strategies are being implemented at this rate, given their
inherent relevance for most institutional investors.
Interestingly, it has taken some time to get to this point
given that we started developing the concept in 2000 as part of
our work on structured alpha and then in more detail in 2002 as
While it is satisfying that our clients have been able to
benefit first from a range of smart beta strategies, we are
somewhat concerned about the proliferation of products on the
market that claim to be smart beta, particularly in the equity
The data also shows that last year Towers Watson's clients -
which include pension funds, sovereign wealth funds and
insurance companies - carried out alternative asset class
selections worth more than four times as much (over $12.5bn) as
five years ago.
Among alternatives, during 2013, real estate attracted the most
interest (more than $4bn), where one quarter is in smart beta,
followed by direct hedge funds ($3bn) and infrastructure ($2bn)
where one third was in smart beta strategies. In the same
period, direct private equity attracted around $1.5bn, while
illiquid credit (distressed debt and lending) attracted about
$1bn in assets.
"Larger institutional funds are likely to continue to invest in
funds directly for most alternative asset classes rather than
via funds of funds as investors continue to focus on better fee
structures, greater transparency and smart beta options," added
Baker. "Indeed, there were only three FoHF mandate selections
in 2013, which is a demonstration of this point."