Smart-beta usage reaches record high

Adoption of smart-beta strategies has reached a record high with 58 per cent of institutional investors using this type of strategy, as concerns about the long-term track records of these products diminish.

Research by the FTSE Russell surveyed 178 asset owners globally and found growth in smart beta usage was reported in all AUM tiers and across all geographies.

The figure rose to 78 per cent when it included investors who were actively planning to use one in the future.

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In particular, uptake of multi-factor strategies had tripled since 2015 with 71 per cent choosing this as their smart beta vehicle of choice over low volatility or value strategies.

The reason for the growth, FTSE Russell said, was asset owners were becoming more comfortable with these type of assets and viewing smart-beta as similar to active rather than passive strategies as well as adopting them for cost-saving purposes.

Rolf Agather, managing director for research & innovation at FTSE Russell, said: “Risk reduction, return enhancement and improved diversification continue to drive smart beta adoption among institutional investors globally. Within smart beta, multi-factor index-based strategies have undoubtedly been the market’s favoured choice, with uptake more than tripling since 2015. We expect sustained growth in smart beta, especially when it comes to multi-factor combination strategies.”

Looking ahead, many said they intended to include ESG considerations into their smart-beta products in order to avoid long term risk, an integration move the organisation described as ‘smart sustainability’.

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