Welcome to the new my.morningstar.com! Learn more about the changes and how our new features help your investing success.

A Global Guide to Strategic-Beta Exchange-Traded Products – 2017

Fourth annual global guide to strategic-beta ETPs; Another strong year for strategic-beta ETPs in the Asia-Pacific region driven by Japan.

Executive Summary

  • Three years ago, 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.
  • In recent years, the space has grown more rapidly than the broader ETP market as well as the asset-management industry as a whole. That said, the pace of these products’ market-share gains has decelerated more recently as exchange-traded funds tracking more-traditional benchmarks have been garnering a greater share of net new flows.
  • Strategic-beta ETPs’ 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, 2017, there were 1,320 strategic-beta ETPs, with collective assets under management of approximately US$707 billion worldwide. Assets in these products grew 28.3% relative to their June 30, 2016, level.
  • Dividend-screened/weighted ETPs continue to rank at or near the top of the list of the most popular grouping of strategic-beta ETPs. This should come as little surprise when considered in the context of the prevailing interest-rate environment.
  • Multifactor ETPs have surged in number and popularity. As of the end of June 2017, there were 349 such ETPs worldwide, with collective AUM of US$57 billion.
  • The number of new product launches has come off a bit from the record level set last year. There were 204 new strategic-beta ETPs brought to market in the 12 months through June 2017, down slightly from 211 during the prior period. More strategic-beta ETPs were introduced in Europe than all other regions combined. As a result, the European menu is now looking every bit as saturated as that in the United States.
  • A commonality among the markets we examined is the increasing complexity of the benchmarks underlying new ETPs. As more traditional, broad-based market-cap-weighted exposures and single factor ETFs have proliferated, ETP providers have launched more multifactor ETPs and factor-timing products are now in the works.
  • 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. To assist investors in this process, Morningstar has assigned Morningstar Analyst Ratings to 119 strategic-beta ETPs worldwide since November 2016. These funds collectively held more than US$495 billion in investors’ money as of June 30, 2017—representing 70% of the total amount invested in global strategic-beta ETPs.
  • An increasingly crowded and competitive landscape will inevitably put pressure on fees. We question how long providers will be able to justify premium pricing for these funds.
  • 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. 


170914 SBGuide 01(en)

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Member.

Register For Free

About Author

Morningstar ETF analysts  -

Audience Confirmation

By clicking "accept" I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See "Cookie Consent" for more detail.

  • Other Morningstar Websites
© Copyright 2021 Morningstar, Inc. All Rights Reserved.      Terms of Useund      Privacy Policy.
© Copyright 2021 Morningstar Asia Ltd. All rights reserved.

Terms of Use        Privacy Policy        Cookies