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Asset managers to benefit from smart beta
24 April 2014
Moody’s report explores ETF market segment
The rise of smart beta products in the exchange traded funds
(ETFs) industry is explored in Moody's new report,
Promising Futures: Smart Beta Product Evolution Will
Benefit Certain ETF Providers.
"Smart beta or 'intelligent indexing' is an investment strategy
that resides in between passive and active management," said
Stephen Tu, Moody's vice president and author of the report.
"It attempts to deliver higher returns to investors by using an
alternative form of indexing based on risk premia such as
Compared with passive management, smart beta promises enhanced
returns over cap-weighted benchmarks. Compared with active
management, it offers potential returns over traditional
indices at a lower cost with greater transparency.
Following a 24.6% increase in assets last year, ETFs are
looking to grow further via new methods. Smart beta is
currently the fastest-growing sector within the ETF space,
expanding at an annual rate of 43% in terms of combined AuM of
the top six players. NYSE Liffe recently launched a suite of
smart beta futures based on MSCI factor indices.
Although smart beta represents only 19% of total ETF assets,
the futures contract launch has strengthened the institutional
credibility and acceptance of the investment strategy.
"The expansion of smart beta will benefit certain asset
managers," added Tu. "Invesco's Powershares franchise, which
offers smart beta ETFs, will benefit, as will Blackrock.
Guggenheim may also benefit given the majority of its ETFs are
based on non-traditional indexing."