Investors still puzzled by smart beta

9 September 2019

Education around smart beta remains the biggest challenge to their uptake, according to VanEck, with over half of finance professionals saying they do not know enough about them.

The firm’s annual survey of 221 people found 56% said the biggest barrier to using smart beta products was that they ‘did not know enough’ about them.

Nevertheless, the volume of professionals who said they had a broad awareness of the strategies had risen from 81% in 2016 to 93%.

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Respondents said strong performance and reduced volatility would be the biggest catalysts for them to start using smart-beta products and 26% said they were ‘considering’ the use of them in portfolios.

Arian Neiron, managing director of VanEck, said: “Strong performance is the number one motivation for using smart beta. Investors and their advisers are realising that active funds often underperform their benchmarks, so investors they are shifting to smart beta strategies as they are more effective in helping them achieve their investment and performance objectives.”

The number of advisers who were already using smart beta products rose from 37% in 2016 to 46%, with most using them for Australian or international equity strategies, and 65% of these advisers said they planned to increase their use in the next 12 months.

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