The European smart beta market is expected to increase almost fourfold to €297 billion ($406.7 billion) by 2018, according to a report from consultant Spence Johnson and data provider CAMRADATA.
The current market, around €78 billion, will grow as investors start to fund smart beta allocations from active investments, according to the report.
“Although smart beta allocations have in the past been funded out of passive allocations, there is evidence of a clear trend of investors beginning to fund smart beta allocations from ‘active’ budgets,” the report states.
The report said the European smart beta market is “dominated” by institutional investors, accounting for 72%, or €54 billion. The U.S. is different, with retail-based investors accounting for 50% of smart beta, largely through exchange-traded funds.
The report also said that, despite data limitations to break down the institutional market further, qualitative feedback suggested defined benefit pension funds make up the majority of investors in Europe.
The report is based on analysis of 204 smart beta strategies in the European market, run by 32 money managers.