With smart beta funds now accounting for a fifth of the US ETF market, European investors are beginning to show solid interest in similarly constructed passive instruments.

While the European market is less mature, “investors are progressively improving their knowledge around these kinds of solutions and are becoming more aware of the potential opportunities they can bring for their portfolios,” according to Fannie Wurtz, Amundi’s managing director of ETF, Indexing & Smart Beta. “If we look at the European ETF flows since the beginning of 2016, we can see that smart beta equity ETFs were the most popular, collecting almost €2.5bn year-to-date.”

The Edhec Risk survey, recently published by Amundi, also shows increased interest in smart beta ETF use among institutional investors; almost 70% of respondents invested in such products during 2015.

Amundi is well positioned to take advantage of the increased interest in smart beta, with a full range of solutions that aim to deliver better risk-adjusted return profiles than traditional indices. At a time when markets are characterised by low interest rates and high volatility, investors are looking for investment tools that can provide yield while monitoring risk. The firm offers investors both active and passive smart beta funds, including ETFs, index funds, mandates and tailor-made solutions for specific requirements.

Amundi’s platform allows clients to replicate every existing smart beta index issued by a major provider as well as customising their investment choices.

“We are fully committed to continuously developing our product range to offer investors a comprehensive choice to define risk and asset allocation efficiently,” says Wurtz. “We plan to keep on developing innovative client solutions backed by both internal and external research capabilities and leveraging our partnerships with index providers.”

Amundi’s first multi-strategy smart beta ETF, launched in partnership with index provider ERI Scientific Beta, amassed more than €470m ($530m) in assets under management since it was launched in 2014. A similarly-constructed fund covering European equities followed in January 2016. The Scientific Beta Developed Multi-Beta Multi-Strategy ERC index has outperformed the MSCI World index by 4.73% since 2014.

In May 2016, Amundi launched the final fund of its monofactor ETF range, which is based on the MSCI Europe index, covering size, value, low volatility, dividends, momentum and quality factors with a uniform charge of 0.23%.

The firm also launched a series of solutions tracking MSCI’s Low Carbon Leaders strategy indices, an index range that it designed in collaboration with two major European pension funds. With mainstream investors increasingly considering climate change to be a major financial threat, according to the firm, the range is intended to allow clients to lower their carbon risk exposure without sacrificing performance.

“We’re confident that investment solutions including environmental criteria will keep on developing further as we assist to growing demand from institutional investors for solutions combining smart beta filters and ESG criteria,” says Wurtz.

Amundi has the ability to customise portfolio allocation according to clients’ requirements and preferences, allowing adjustments to weighting and allocation formulae so clients can take into account any ethical, environmental, governance and corporate social responsibility considerations they wish.

Looking ahead, Wurtz sees just a few surmountable obstacles to the industry, singling out transparency and information as some of the main concerns for investors when considering smart beta funds. “Education and advisory will be crucial and the key elements that will make a difference between providers,” says Wurtz. “With this in mind, we have developed a dedicated advisory service to assist investors in the mapping, selection and implementation of smart beta allocation.”

This initiative, along with a comprehensive set of solutions, including different kinds of investment vehicles such as ETFs, index funds, mandates and active funds, will make the difference according to Wurtz. “Institutional investors will look more at the investment partners that will be able to provide them with a wide range of choices, to face different market conditions and to implement their asset allocation dynamically.”