FTSE Russell recently asked 250 of the largest institutional investors across North America, Europe and Asia (14% of which were based in Canada) with more than $2 trillion in invested assets for their opinion on “smart beta” indexes and investment strategies based on them. For purposes of its annual survey, FTSE Russell defines a “smart beta” index as a market index which is not traditionally market cap-weighted, but rather built on other approaches such as alternative weighting, selecting for single factors or combining multiple investment factors.
When asked what types of smart beta indexes they are currently using, global survey respondents cited low volatility, value and multi-factor combination indexes as most popular. Still popular but further down the list were fundamental, momentum and high quality indexes.
Recent feedback from the largest Canadian investors supports the utility that smart beta indexes continue to bring to Canada asset owners. According to Rajiv Silgardo of BMO Global Asset Management, “In Canada, our equity markets and indices have limited breadth. Thus as a result smart beta strategies focused on lowering risk and/or providing higher yields have been very popular and fast growing for a long period of time.”
Jackie O’Flanagan, Head of Canada and Regional Director for FTSE Russell, adds that the smart beta index use in Canada has matured to the point where large numbers of investors now consider smart beta to be an important part of their toolkit. “A clear sign of maturing smart beta use is that many Canadian investors are now looking beyond single factor indexes to multi-factor combinations,” said O’Flanagan. “Yet while many asset owners have increased their understanding and implementation of smart beta, continuing innovations in other asset classes and the multi-factor arena underscore the need for more information and education."
Source: FTSE Russell smart beta survey- 2016 global survey findings from asset owners.
Over 90% of FTSE Russell smart beta survey respondents have either direct responsibility for selecting equity investments or play roles in teams that perform this function within corporations or private businesses (23%), government organizations (24%), unions or industry-wide pension schemes (18%), non-profit organizations or universities (14%). 63% of survey respondents manage defined benefit plan assets, 45% managed defined contribution plan assets and 14% manage endowment or foundation assets. The breakdown in assets under management for survey respondents was 20% for asset owners with less than $1 billion, 46% between $1 billion and $10 billion and 34% with more than $10 billion in assets under management. Total assets under management for survey respondents this year is estimated at over $2 trillion.
For a deeper dive into key findings from the third annual FTSE Russell global institutional smart beta survey, go to a special landing page on the FTSE Russell website.
© 2016 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE TMX Global Debt Capital Markets Inc. and FTSE TMX Global Debt Capital Markets Limited (together, “FTSE TMX”) and (4) MTSNext Limited (“MTSNext”). All rights reserved.
FTSE Russell® is a trading name of FTSE, Russell, FTSE TMX and MTS Next Limited. “FTSE®”, “Russell®”, “FTSE Russell®” “MTS®”, “FTSE TMX®”, “FTSE4Good®” and “ICB®” and all other trademarks and service marks used herein (whether registered or unregistered) are trade marks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, or FTSE TMX.
All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein.
Views expressed by Rajiv Silgardo and Jackie O’Flanagan are as of July 20, 2016 and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.
No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Russell Indexes or the fitness or suitability of the indexes for any particular purpose to which they might be put.
No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this IDEA should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group index data and the use of their data to create financial products require a licence from FTSE, Russell, FTSE TMX, MTSNext and/or their respective licensors.
Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.