The proportion of asset
owners investing in smart beta strategies globally has almost doubled over the
past three years, according to new research by FTSE Russell.
Forty-eight percent of
respondents to the index provider’s fifth annual smart beta survey said they
had invested in smart beta, a slight uptick from 46 percent in 2017. Although
the spread of smart beta has slowed over the last year, adoption has nearly
doubled since 2015, when 26 percent of asset owners surveyed had allocations to
the factor-based strategies.
The FTSE Russell report
showed that smart beta has grown especially popular in Europe: Sixty-one
percent of European respondents said they had a smart beta allocation in this
year’s survey. Meanwhile, North American investors had the highest
year-over-year increase in smart beta adoption, with 42 percent reporting an
allocation, up from 37 percent in 2017.
The survey included
responses from 185 asset owners with combined assets under management of more
than $3.5 trillion. A majority of respondents were based in North America, with
just under a third from Europe.
Among asset owners with
portfolios larger than $10 billion, 56 percent had smart beta allocations.
Meanwhile, 39 percent of funds under $1 billion said they were invested in
smart beta, a sharp increase from last year’s 19 percent.
For those that fell in
between, the smart beta adoption rate was 43 percent, down from 57 percent in
According to the survey,
multi-factor smart beta strategies are the most popular, followed by
low-volatility and value strategies.
Respondents with smart beta
allocations were largely pleased with the investment, with 62 percent reporting
that they were either “satisfied” or “very satisfied.”
Still, the asset owners
polled by FTSE Russell said there were still several barriers to more
widespread adoption of smart beta. Forty-five percent said they were unsure how
to determine the best strategy for their portfolio, while 36 percent were
worried about unintended factor biases.
Others cited the growth in
smart beta investing as a detractor. Among the survey’s respondents, about a
third believed increased adoption of the strategy could erode future returns.
here for the original article from Institutional Investor.