More than half institutional investors using smart beta strategies: survey

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Planning a business using intelligent leadership strategies as a human head shape made with with gears and cogs building an organization symbol shaped as large cog wheels on white © lightwise /123RF Stock PhotosMore than half (58 per cent) of institutional investors surveyed have implemented smart beta strategies, according a recent survey from FTSE Russel.

This represents a 10 per cent increase since 2018.

When looking at investors that have implemented smart beta, or are evaluating or planning to use a smart beta index-based strategy, the number jumps to 78 per cent for 2019.

The increased adoption of smart beta is happening globally, the survey found. Europe, North America and the Asia Pacific region all saw growth, in all tiers of asset under management ranging from less than US$1 billion to more than US$10 billion.

Europeans held the highest rate of adoption with 65 per cent of respondents saying they currently had an allocation to smart beta, while 60 per cent of North Americans said so.

In terms of why they’re using the strategies, notably the number of investors saying they use smart beta for cost-savings objectives grew from 15 per cent in 2014 to 31 per cent in 2019.

Multi-factor index-based strategies continue to gain popularity, with 71 per cent of those surveyed indicating they use them, up from 49 per cent in 2018. The strategies look especially popular when compared with the 35 per cent using low volatility strategies and just 28 per cent using value strategies.

“Risk reduction, return enhancement and improved diversification continue to drive smart beta adoption among institutional investors globally,” said Rolf Agather, managing director of research and innovation at FTSE Russell, in a press release. “Within smart beta, multi-factor index-based strategies have undoubtedly been the market’s favoured choice, with uptake more than tripling since 2015. We expect sustained growth in smart beta, especially when it comes to multi-factor combination strategies.”

 

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