Perhaps it’s fair to say by now that smart beta—or strategic beta, if you will—has gone from fad to bona fide trend, particularly based on numbers released Wednesday by ETFGI showing that global assets invested in smart-beta exchange-traded products hit a record high of US$429 billion as of the end of June 2016.
According to ETFGI, a London-based, ETP-focused research firm, assets in smart-beta ETPs listed in the U.S., Canada, Europe and Japan rose 7.1 percent during the first half of this year. During the past five years they’ve grown at a compounded annual rate of 31.3 percent.
Year-to-date through June, smart-beta ETPs have seen net inflows of $16.15 billion, with volatility factors garnering the largest net inflows ($14.32 billion), followed by value factor ($6.83 billion) and dividend factor-based products ($3.09 billion).
Based on the math above, some smart-beta categories obviously saw outflows, but in its press release ETFGI didn't mention which categories were on the short end.
iShares collected the most net inflows in smart-beta products year-to-date through June with $19.02 billion, followed by Vanguard at $5.26 billion and Charles Schwab Investment Management at $2.15 billion.
Smart-beta strategies can take many forms, but essentially follow rules-based indexes providing exposure to specific factors, market segments or systematic strategies other than market-cap weighting. These mostly apply to equities.
Rapid growth of smart beta aside, the collective category remains dwarfed by the $1.75 trillion in assets invested in traditional market cap-weighted ETPs.