Global X started down the smart beta path in 2011, when it launched SDIV, its Superdividend ETF, that attempts to offer exposure to the highest-yielding equities in the world. Since then, Global X has launched a suite of multifactor ETFs designed in partnership with academic researchers at Europe’s EDHEC business school.

The panelists agreed that there were four to six factors for equities, some concentrated around producing pricing anomalies that lead to greater total returns, like value, size, quality and dividend growth, and some focused on greater risk-adjusted returns, like low-volatility.

Recent research that suggests a larger universe of smart beta factors is either rediscovering already identified factors or is too recent to be confirmed, according to the panelists.

“We think about a factor having a long data history that allows us to see if this anomaly exists historically,” said Abdur Nimeri, senior investment strategist with Northern Trust in Chicago. “We start with that as our basic premise, then we start to think about whether the factor impacts shareholder value, and why.”

Northern Trust approached factor-based investing from the direction of dividends as it considered how to overlay a quality screen onto its suite of dividend products. The firm now offers multifactor products in addition to its suites of core allocation and thematic funds.

Nimeri said that having a long data history separates "confirmed" factors like value and size from others that could emerge from data mining that limits the time period or area of markets in which factor research is conducted.

“We can all say that we believe in the value premium, but that doesn’t necessarily preclude it from being data mined,” Jacobs said. “A lot of what we’ve seen is redefining factors since they've already been proven by academia. Fama and French introduced the three factor model that includes both value and size, and htey used the price-to-book definition of value, and since hten you've actually seen dozens of different defintions of what value is. Think about all the different valuation metrics you can use... it introduces a bunch of different ways to measure value and this is where we think data mining starts to come into the equation, because suddenly you're opening up the question of is this really persistant in the way the academics have judged it,.”

Jacobs said that advisors should be careful to select smart beta products matching factors with measurements that academic researchers used.

The panelists identified a sixth factor, momentum, that neither fit the definition of a return-enhancing factor nor a risk-mitigating factor.

“We believe momentum is a stand-alone factor,” said Framsted. “Where does it fit in the Morningstar nine-box? Most of the time it seems to be large-growth oriented, but there’s some variability in the type of exposure you get.”