As more and more investors lose faith in active managers, they are increasingly turning to a compelling alternative – smart beta. Combining elements of both active and passive management, smart beta strategies have enjoyed significant inflows in the past few years and continue to see growing interest from investors. The latest evidence for this comes from FTSE, a global index provider, which has announced that assets under management in ETFs linked to the fundamentally weighted FTSE RAFI index series have topped $5 billion.
‘ PowerShares ’
For providers of exchange-traded products (ETPs), 2013 is fast becoming a vintage year. Year-to-date net inflows reached a record $107 billion through the end of May 2013, a whopping 31% higher than the $82 billion seen during the same period last year, according to data from ETFGI. When added to the existing ETP pile, total assets under management in the industry now stand at an all-time high of $2.14 trillion across some 4,849 products from more than 200 providers.
With most mainstream markets and indices tracked by multiple exchange-traded funds (ETFs), ETF providers are increasingly having to find an edge to help their new funds stand out. Often this edge comes via a niche focus or by way of an alternative ‘smart beta’ index. The newly launched Barron’s 400 ETF (BFOR) fits nicely into this latter category. Listed on the NYSE Arca, the fund is based on the Barron’s 400 Index, a rules-based index tracking the performance of 400 equally weighted US companies with strong fundamentals.
S&P Dow Jones has again added to its rapidly expanding suite of indices with the launch of the S&P Nordic Low Volatility Index, an index tracking the performance of the 30 least volatile stocks in the S&P Nordic Broad Market Index (BMI). The new index further enhances the index provider’s existing low-volatility line-up and reflects continued investor interest in low-volatile equity strategies.
Global short and leveraged exchange-traded product (ETP) assets rose by $4.4bn in the first four months of 2013, to $48.5bn, according to data released by Boost ETP. The growth in assets is a reflection, in part, of the increased breadth and depth of products available, improved education and understanding, and a general move by investors towards more transparent, exchange-traded products.
NYSE Euronext, a leading exchange operator and index provider, has celebrated the 10th anniversary of its Intellidex Indices. The indices, which debuted in 2003, were designed to identify those stocks within a particular market segment that have the greatest potential for capital appreciation. Following their immediate licensing to Invesco PowerShares, to serve as the basis for a range of ‘Dynamic Portfolios’ exchange-traded funds (ETFs), the indices were among the first ‘smart beta’ benchmarks to be adopted by the ETF industry.
Invesco PowerShares, a global provider of exchange-traded funds (ETFs), has announced the launch of the PowerShares Fundamental Emerging Markets Local Debt Portfolio ETF (PFEM). The fund provides investors with exposure to emerging market sovereign debt denominated in local currencies. Unlike most fixed income ETF indices, which typically use some form of market-cap weighting, the fund’s index is weighted based on constituent country’s economic footprint.
S&P Dow Jones Indices has unveiled the S&P 500 Buyback Index, a new index tracking the performance of the S&P 500 constituents with the largest stock buyback programmes. The methodology behind the index, which has been designed to underlie index-linked products such as exchange-traded funds (ETFs), is refreshingly simple. Essentially, the index measures the performance of the top 100 stocks with the highest buyback ratio in the S&P 500 in the last 12 months. It has outperformed the S&P 500 over one, three and five years.
Stoxx, a leading index provider, has introduced the Euro Stoxx 50 BuyWrite 100% Index. The index measures the performance of a buy-write or covered-call strategy based on the Euro Stoxx 50 Index, the eurozone’s leading blue-chip equity index. The new index, which has been designed to underlie index-linked financial products such as exchange-traded funds (ETFs), represents a hypothetical portfolio of a long position in the Euro Stoxx 50 and a sold – or written – call option based on the same index.
Half of institutions using exchange-traded funds (ETFs) expect to increase their allocations to the product in the coming year, according to a study from Greenwich Associates. Andrew McCollum, consultant at Greenwich Associates, said: “Although ETFs first entered institutional portfolios mainly as tactical tools and continue to be used in important tactical functions, many institutions now regularly use ETFs as tools for gaining long-term exposures and implementing core investment strategies.”