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Money Management

Smart beta ETFs gaining traction

With exchange-traded fund usage on the rise by institutional investors and their money managers, providers of the vehicles said the growth of smart beta has also been a boon.

Fergus Slinger, co-head of sales for Europe, Middle East and Africa for BlackRock (BLK) Inc. (BLK)'s iShares business, highlighted the growth of smart beta as one of the key trends driving the uptick in interest in ETFs.

Data by research and consultancy firm ETFGI show reported assets invested in smart beta equity ETFs and exchange-traded products reached a record high at the end of February, at $559.8 billion. That represents an increase of 4.8% for the month.

In terms of region, Europe-listed equity smart beta ETPs accounted for $39 billion, or 7% of the total, up from $36.8 billion as of the end of January.

“The emergence of smart beta delivered via an ETF has empowered institutional investors to access strategies that traditionally were the domain of active managers, through a cost-effective vehicle,” said Claire Perryman, London-based U.K. head of SPDR ETFs at State Street Global Advisors.

“The broad range of exposures available and the ETF industry's capability to innovate make ETFs precious tools for portfolio managers and professional investors to make tactical bets or promptly react to market calls,” said Fannie Wurtz, managing director of Amundi ETF, indexing and smart beta, in Paris. Along with integration into core portfolio allocations as they become increasingly competitive on costs, Ms. Wurtz also highlighted the development of smart beta.

She said 2016 was a record year for single- and multifactor ETFs, attracting more than €7.6 billion ($8.1 billion) in assets. The first quarter of 2017 saw a continuation of the trend. “Investors choose smart beta ETFs to access the potential returns of some specific risk factors without deterioration of the risk profile of their portfolio,” she said. Amundi ETF had €25 billion in assets under management as of Dec. 31.