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A Global Guide to Strategic-Beta Exchange-Traded Products

Second annual global guide to strategic-beta ETPs; Finds faster growth, increased complexity because of product proliferation

Our global team of ETF and passive fund analysts published “A Global Guide to Strategic-Beta Exchange-Traded Products,” its second annual global landscape report about trends in strategic-beta exchange-traded products (ETPs). The full report can be downloaded here.

Executive Summary

  • Last year, we introduced our naming convention and taxonomy for the fast-growing universe of strategic-beta exchange-traded products, or ETPs. In this year’s guide, we provide an update on the state of the global strategic-beta ETP landscape.
  • One year on, the space has continued to grow faster than the broader ETP market as well as the asset-management industry as a whole.
  • Growth has been driven by new cash flows, new launches, and the entrance of new players— some of which are traditional, dyed-in-the-wool active managers.
  • We expect these trends will continue and may ultimately accelerate as newer ETPs tracking new and unproven benchmarks season and more new entrants make their way into the market.
  • As of June 30, 2015, there were 844 strategic-beta ETPs, with collective assets under management of approximately US$497 billion worldwide.
  • Dividend-screened/weighted ETPs continue to be the most popular grouping of strategic-beta ETPs in all but one region we examined. This should come as little surprise when considered in the context of the prevailing interest-rate environment.
  • A commonality among the markets we examined is the increasing complexity of the benchmarks underlying new ETPs.
  • As these strategies become increasingly nuanced, looking to infuse elements of an active manager’s thinking into an index, investors’ collective due-diligence burden will continue to increase commensurately.
  • An increasingly crowded and competitive landscape will also put pressure on fees.
  • We have already seen instances of aggressive fee reductions for strategic-beta ETPs. We anticipate that cost-competition in this space will become more prominent in the years to come.

 

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