Smart beta attracts more investors
The use of multi-factor combination smart beta index-based investment strategies by global asset owners has more than doubled since 2015, with 91 per cent of investors declaring that they have evaluated a smart beta investment allocation or were planning to do so over the next five years, according to FTSE Russell.
The fifth annual FTSE Russell global institutional smart beta survey also showed that nearly 40 per cent were also planning to apply environmental, social and governance (ESG) criteria to a smart beta strategy in the coming months.
The survey also confirmed that investors looked to ESG index-based strategies for performance reasons rather than societal good.
However, the study also found that despite strong growth in adoption, educational shortfalls still existed, with more than 50 per cent of respondents from the UK and US saying that one of the top barriers were issues around how to determine the best strategy for smart beta implementation.
Furthermore, this year 49 per cent of the surveyed asset owners said they used a multi-factor combination smart beta strategy, which represented a 20 per cent growth compared to 2015 when it was first measured.
With the growing interest in multi-factor combination smart beta strategies, investors’ interest in fundamentally weighted strategies had declined significantly.
FTSE Russell’s managing director of North America research, Rolf Agather, said that some responses from this year’s survey reconfirmed growth in awareness and usage of smart beta indexes.
“Notably, awareness and usage of multi-factor and ESG smart beta indexes are growing in recent years,” he said.
“And our survey notes some differences between investors across markets, specifically the US, UK and Canada.”
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