Some things just get better with age.
Other predictions prove prescient, confirmed with the benefit of 20:20 hindsight.
Both of these clichés apply to my views on the recent explosion in “smart-beta” exchange-traded funds (ETFs).
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How ‘Smart Beta’ Funds Outperform the Market
Some things just get better with age.
Other predictions prove prescient, confirmed with the benefit of 20:20 hindsight.
Both of these clichés apply to my views on the recent explosion in “smart-beta” exchange-traded funds (ETFs).
First, over the past several years, “smart-beta” ETFs just keep getting both better and smarter. New strategies continue to emerge that are consistently outperforming traditional, market-cap-weighted indexes.
Second, the trend toward better and smarter in the ETF world is something I expected would take firm hold of the investment community. What was dismissed 18 months ago as a passing fad is the driving force behind ETFs overtaking hedge funds in terms of assets.
At last count from Invesco PowerShares, there were about 350 smart-beta ETFs available to U.S. investors, and the total value of those assets is more than $230 billion. That figure is up from a mere 212 smart-beta funds in 2010 that had less than $65 billion in assets.
Smart-beta ETFs now have become popular among the general investing public, and not just with savvy investors and “early adopters” like yours truly who saw their value years ago.
At that time, I told my audience that smart-beta ETF assets had grown an astonishing 43 during the first nine months of 2013 versus 16 growth in total ETF assets. I also wrote that these funds had attracted $45 billion in new investment during 2013.
Fast forward 18 months, and smart-beta ETFs remain all the rage in the investment world, proving that in terms of marketplace popularity — “smarter” truly is better.
