Skip to main content

You are here

Blog Listing Page

Smart beta increasingly used by financial advisors – FTSE Russell smart beta findings

Smart beta strategy implementation by advisors is prevalent and broadening, according to a new FTSE Russell retail financial advisor market survey. In scenarios where once only actively managed products were considered and used in investment portfolios, advisors are beginning instead to turn to smart beta strategies. Smart Beta: 2015 Survey Findings from U.S. Financial Advisors found that advisors are increasingly looking to harness the benefits of incorporating smart beta strategies into their investment portfolios. These benefits include downside market protection, lower volatility and increased alpha, among others.

Who are the advisors that most frequently tap smart beta strategies? The survey found that advisors who use smart beta tend to be younger, have a higher share of AUM in ETFs and alternative investments and have practices extending beyond the core activities of investment selection, asset allocation and financial planning. These advisors recognize the similarities between smart beta and actively managed funds; users of smart beta tend to blend these two approaches. In addition, the survey showed that when advisors are using smart beta products, more than 70% are using more than one approach. Once advisors begin using smart beta, they tend to broaden out their usage.

Smart beta strategies can potentially offer the advisor a number of benefits that actively managed products do, but for a lower cost. Current smart beta users are more likely to view smart beta as active management and they are more receptive to the newer smart beta approaches tested.

The most frequently used approach among those surveyed was a dividend approach, which weights companies by historical dividend yields, followed by a high quality investment approach. The survey found that 36% of advisors are using dividend approaches, with 35% seeking to use it in the future. As for high quality approach adoption, 27% of advisors currently use high quality and 40% are very likely to use it in the future, giving this approach the highest potential for future use among those tested.

Other smart beta approaches include fundamental, low volatility and equal weight, with the least popular of those tested among advisors being the momentum approach, which incorporates companies that have consistently shown strong performance for the prior 12 months.

The network of advisors who see the merit in adopting smart beta into their investment portfolios is growing and broadening. To learn more about how advisors are incorporating smart beta into their practices, review the complete findings here.



© 2015 London Stock Exchange Group companies.

London Stock Exchange Group companies includes FTSE International Limited (“FTSE”), Frank Russell Company (“Russell”), MTS Next Limited (“MTS”), and FTSE TMX Global Debt Capital Markets Inc (“FTSE TMX”). All rights reserved.

“FTSE®”, “Russell®”, “MTS®”, “FTSE TMX®” and “FTSE Russell” and other service marks and trademarks related to the FTSE or Russell indexes are trade marks of the London Stock Exchange Group companies and are used by FTSE, MTS, FTSE TMX and Russell under licence.

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 the London Stock Exchange Group companies nor its licensors for any errors or for any loss from use of this publication.

Neither the London Stock Exchange Group companies nor any of their 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.

The London Stock Exchange Group companies do not provide investment advice and nothing in this article should be taken as constituting financial or investment advice. The London Stock Exchange Group companies make no 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 London Stock Exchange Group companies. Distribution of the London Stock Exchange Group companies’ index values and the use of their indexes to create financial products require a licence with FTSE, FTSE TMX, MTS and/or Russell and/or its licensors.

The Industry Classification Benchmark (“ICB”) is owned by FTSE. FTSE does not accept any liability to any person for any loss or damage arising out of any error or omission in the ICB.

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.

Blog Listing Page