Institutional investors turning to smart beta ETFs - Seeking outperformance and lower volatility
TORONTO, June 3, 2015 /CNW/ - Institutional money managers have a vast array of sophisticated investment options at their disposal. Increasingly, they are turning to exchange-traded funds (ETFs), citing liquidity, transparency and ease of implementation.
In particular, institutional investors have expressed a growing interest in smart beta ETFs, according to research conducted by Market Strategies International.
Sponsored by Invesco PowerShares, an affiliate of PowerShares Canada, the research report, titled The Evolution of Smart Beta ETFs, confirms that the use of smart beta ETFs among institutional decision makers is poised for continued growth.
Smart beta indices employ alternative security selection and weighting criteria with the goal of outperforming a market-capitalization-weighted benchmark and/or reducing risk.
Smart beta ETFs captured over 17% of total U.S. ETF equity inflows in 2014, despite representing only 11% of institutional ETF assets. Thirty-six percent of institutional investors used smart beta ETFs in their portfolios, up from 24% in 2013, while the mean allocation rose to 13% from 7%.
Performance was the primary motivator for smart beta ETF usage for 22% of respondents, followed by reducing volatility (19%) and seeking exposure to specific assets (15%).
Asset flows could increase dramatically in the coming three years, as 62% of respondents said they expected to increase their use of smart beta ETFs, up from 53% in 2013.
Low-volatility, fundamental-weighted and high-dividend ETFs are poised to see the greatest growth over the next three years, as more than two-thirds of respondents indicated they are likely to use one of these strategies.
"Invesco PowerShares has a long track record of bringing smart beta strategies to market in the U.S., and Invesco Canada extends that track record with a diverse ETF lineup in Canada," says Jason MacKay, Head of Global Investment Strategies at Invesco Canada. "We are committed to partnering advisors with next-generation index creators to deliver investment strategies that go beyond market-capitalization weighting to better manage risk and enhance returns for investors."
Financial professionals can access the full research results and analysis by visiting: https://www.invesco.com/portal/site/us/financial-professional/etfs/subscribe/market-strategies-intl-report.
The survey was conducted between October 9, 2014 and December 2, 2014. A 15-minute online survey was administered to 253 institutional decision makers, including pensions, endowments/foundations, non-profit institutions and mutual fund providers as well as registered investment advisors ("RIAs") who manage institutional business. All institutional participants had at least US$20 million in assets and allocated at least 1% of their assets to ETFs. Institutional RIAs had at least US$25 million in assets under management – a portion of which was managed on behalf of institutional investors.
For more information, please visit www.invesco.ca. You can also connect with Invesco Canada on Twitter (@InvescoCanada), LinkedIn or Facebook.
Commissions, management fees and expenses may all be associated with investments in ETFs. ETFs are not guaranteed, their values change frequently and past performance may not be repeated. Please read the prospectus before investing. Copies are available from Invesco Canada Ltd. at www.powershares.ca.
About Invesco Canada Ltd.
Invesco Canada Ltd., operating under three distinct yet complementary product brands (Trimark, Invesco and PowerShares), is one of Canada's leading investment management companies. A subsidiary of Invesco Ltd., Invesco Canada's singular focus is on investment management, offering a diversified suite of solutions to institutions, organizations, companies and individual investors across Canada and around the world. Additional information is available at www.invesco.ca.
About Invesco Ltd.
Invesco Ltd. is a leading independent global investment management firm, dedicated to helping investors worldwide achieve their financial objectives. By delivering the combined power of our distinctive investment management capabilities, Invesco provides a wide range of investment strategies and vehicles to our clients around the world. Operating in more than 20 countries, the firm is listed on the New York Stock Exchange under the symbol IVZ. Additional information is available at www.invesco.com.
Invesco® and all associated trademarks are trademarks of Invesco Holding Company Limited, used under licence. PowerShares®, Leading the Intelligent ETF Revolution® and all associated trademarks are trademarks of Invesco PowerShares Capital Management LLC (Invesco PowerShares), used under licence. PowerShares Canada is a registered business name of Invesco Canada Ltd.
© Invesco Canada Ltd., 2015
SOURCE Invesco Canada Ltd.
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