Another Milestone For Smart Beta ETFs

Previously derided and, more recently, validated on multiple, smart beta exchange-traded funds continue hauling in assets.

Earlier this week, ETFGI, a London-based ETF research firm, reported that “assets invested in smart beta ETFs/ETPs listed in globally reached a new record high US$429 billion at the end of June 2016, according to data from ETFGI’s June 2016 global smart beta ETF and ETP industry insights report.”

Low Volatility Leads Smart Beta Boom

As has been previously noted, low volatility are leading this year's smart beta boom. For example, the iShares Edge MSCI Min Vol USA ETF (iShares Trust USMV) has added $6.62 billion in new assets year-to-date, a total exceeded by just two other ETFs. Meanwhile, the rival PowerShares S&P 500 High Dividend Low Volatility Portfolio (PowerShares Exchange-Traded Fund Trust II SPLV has seen inflows of $1.69 billion.

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“In June 2016, smart beta products saw net inflows of US$5.70 billion. Volatility factors gathered the largest net inflows with US$2.17 billion, followed by dividend factor based products with US$1.71 billion and value factor with US$1,592 Mn,” said ETFGI. “YTD, smart beta products have seen net inflows of $16.15 billion. Volatility factors gathered the largest net inflows with $14.32 billion, followed by value factor with $6.83 billion and dividend factor based products with $3.09 billion.”

Looking Ahead

The data jibe with prior estimates forecasting more rapid growth for smart beta ETFs. Earlier this year, in its third annual survey of institutional investors and their views on smart beta products, FTSE Russell found professional investors are expected to ratchet up their use of smart beta ETFs.

“The percentage of asset owners reporting that they are currently evaluating smart beta has doubled since 2014 and 2015 levels. This growth has come from asset owners who had not previously evaluated smart beta, as well as from asset owners who have evaluated smart beta in the past, but who choose not to implement, and who, we believe, are again evaluating smart beta,” according to FTSE Russell.

In May, BlackRock revealed data that showed smart beta ETF assets will reach $1 trillion on a global basis by 2020 and then more than double to $2.4 trillion by 2025. The global ETF industry currently has north of $3 trillion in assets under management.

“YTD, iShares gathered the largest smart beta ETF/ETP net inflows year to date in 2016 with US$19.02 Bn, followed by Vanguard with US$5.26 Bn and Charles Schwab Investment Management with US$2.15 billion net inflows,” said ETFGI.

In June, smart beta flows leaders were iShares, Vanguard and PowerShares, according to the research.