Are Strategic Beta ETFs a Threat to Active Fund Managers?

Designed to either improve return or alter risk relative to traditional market-capitalisation-weighted indices by using factor tilts, strategic beta indices are garnering assets

Hortense Bioy, CFA 18 November, 2014 | 3:00PM

Strategic beta, more commonly known as ‘smart beta’, is all the rage at the moment. Everyone in the ETF world talks about it and new products carrying the label launch almost every week.

Active managers face pressures to demonstrate their merit

Investors are buying into the concept too. Designed to either improve return or alter risk relative to traditional market-capitalisation-weighted indices by using factor tilts, strategic beta indices are garnering assets. Global assets in strategic beta ETFs have increased by 87% in two years and now account for $380 billion, according to Morningstar data.

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About Author

Hortense Bioy, CFA

Hortense Bioy, CFA  is director of passive funds and sustainability research in Europe for Morningstar

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