More investors taking on smart beta ETFs

Research from VanEck reveals that investors are increasing their allocation towards smart beta ETFs, as opposed to market capitalisation and active strategies.

Smart beta cumulative net flows as a percentage of total flows has grown from 11.7 per cent to 21.7 per cent between 2016 and 2018, according to VanEck’s ETF IQ Scorecard for December 2018.

“By strategy, smart beta ETFs are gaining in popularity, now accounting for about one-quarter of all inflows at $1.6 billion over the year to date, as investors seek targeted investment outcomes and wealth-building strategies not offered by traditional ETFs, which track market capitalisation indices,” VanEck said.

Meanwhile, net flow allocation to active exchange-traded products has remained stable at about 10 per cent of total flows.


VanEck also found that international equity ETPs attracted the greatest net inflows in 2018 at $3.2 billion, compared with $1.7 billion for Australian equities.

“This reflects the trend for Australian investors to move offshore to diversify their portfolio and pursue growth opportunities,” VanEck said.

“ETP providers have recognised this demand with the number of international equity ETP products available increasing by 16 per cent to 88 in 2018.”

As for Australian and international fixed income ETPs, they attracted net flows of $1.1 billion in the year-to-date as investors boost allocations to relatively defensive assets given greater market volatility.

Further, the number of fixed income ETP products available increased by 20 per cent to 24 in 2018.

More investors taking on smart beta ETFs
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Adrian Flores

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].

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