Insights | The anatomy of smart beta

Key findings from the FTSE Russell 2016 Smart Beta Survey

The survey covered 250 asset owners from North America (49%), Europe (33%) and Asia Pacific and elsewhere (18%), with total assets under management of over US$2 trillion. Its key findings were:

  • 72% of asset owners are now using or evaluating smart beta, up from 44% a year earlier
  • Return enhancement, risk reduction and increased diversification remain the primary objectives for those implementing smart beta allocations
  • Cost savings were cited by more than a third of the largest asset owners as a reason for evaluating smart beta
  • Asset owners increasingly view smart beta as part of their active equity allocation
  • Low volatility, value, multi factor and fundamental indexes are the most commonly used smart beta strategies

Smart beta indexes have become increasingly popular in recent years, with nearly three-quarters of global institutional investors and asset owners now either using or evaluating smart beta index based strategies for their portfolios.

Smart beta is a generic term for indexes constructed using a variety of approaches other than the standard method of weighting index constituents by their market capitalization. These indexes capture a variety of exposures to academically recognized drivers of risk or reward, helping users gain more control as they fine-tune their portfolios toward achieving specific investment objectives. In this FTSE Russell Insights we examine the origins of smart beta, consider the variety of indexes on offer and their uses, and look into the future of this type of index.

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Supporting documents

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