Passive Fund Fees Fall as Smart Beta ETF Market Grows

As strategic beta ETFs with an income or value bias have become increasingly commoditised, fees have fallen and profit margins have become squeezed

Morningstar ETF Analysts 12 September, 2016 | 12:17PM

Strategic beta, widely referred to as “smart beta,” refers broadly to a growing group of indexes and the exchange-traded products and other funds and investment products that track them.

The majority of these indexes seek to enhance returns or minimise risk relative to a traditional market-capitalisation-weighted benchmark. Others seek to address oft-cited drawbacks of standard benchmarks, such as the overweighting of the most-indebted issuers in market-cap-weighted fixed-income benchmarks.

These benchmarks and the investable products that track them exploit many of the same “factors” such as size, value, quality or momentum, or to mitigate risk in a manner similar to active managers.

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Morningstar ETF Analysts  research hundreds of ETFs available to European investors. The Morningstar Rating for ETFs is based on a risk-adjusted performance measure

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