Smart beta gains ground

Money Magazine Australia - - IN BRIEF -

The ma­jor­ity of fi­nan­cial pro­fes­sion­als are us­ing smart beta strate­gies to re­place ac­tively man­aged funds, ac­cord­ing to Va­neck’s third an­nual smart beta sur­vey. It found that the key mo­ti­va­tions for us­ing a smart beta strat­egy is to achieve out­per­for­mance (64%), achieve bet­ter risk-ad­justed re­turns (55%), re­duce volatil­ity (50%) and re­duce costs (46%).

“Smart beta is giv­ing ac­tive man­age­ment a run for its money,” says Arian Ne­iron,

Va­neck’s man­ag­ing di­rec­tor and head of Asia

Pa­cific. “For the first time since the sur­vey launched in 2016, the ma­jor­ity of re­spon­dents are us­ing smart beta strate­gies in their port­fo­lios and they are us­ing them as a re­place­ment for ac­tive man­age­ment strate­gies.”

So what ex­actly is smart beta?

“Where tra­di­tional mar­ket-cap­i­tal­i­sa­tion-weighted ex­change traded funds con­sider that mar­ket size in­cor­po­rates ‘all fac­tors’, smart beta ETFs put more fo­cus on some fac­tors over oth­ers,” says Chris Brycki, from Stock spot. “Com­mon smart beta fac­tors in­clude growth ver­sus value, small cap ver­sus large cap or fun­da­men­tal fac­tors like div­i­dends.” There are a num­ber of smart beta ETFs to choose from. Just make sure you un­der­stand ex­actly what the fund is in­vest­ing in and whether the smart beta fac­tors are cycli­cal.

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