Smart Beta ETFs Poised for Growth Among Institutional Asset Managers
December 11 2013 - 9:30AM
Marketwired
Smart Beta ETFs Poised for Growth Among Institutional Asset
Managers
Independent Research Reveals Increased Institutional Interest in
Non-Market Cap Weighted ETFs
CHICAGO, IL--(Marketwired - Dec 11, 2013) - Institutional
investors report they are increasingly using smart beta Exchange
Traded Funds (ETFs), according to a new study conducted by Cogent
Research, a division of Market Strategies International. The
results reveal that more than half (53%) of institutional decision
makers will increase their use of smart beta ETFs over the next
three years -- higher than any other ETF category, including
market-cap weighted ETFs (48%).
"These results echo what we are hearing from our clients and
confirms what we have seen with industry-wide flows: non-market cap
weighted ETFs have captured 25% of the equity ETF inflows year to
date, despite representing only 12% of the assets," said John
Hoffman, Invesco PowerShares director of ETF institutional sales
and capital markets. "Furthermore, the research results show that
interest in the smart beta category is being driven by a desire to
improve risk-adjusted returns, reduce volatility and gain access to
more sophisticated weighting methodologies."
According to the study, larger institutions (those managing in
excess of $500 million in assets) are twice as likely to agree that
smart beta ETFs provide better risk-adjusted returns relative to
market cap weighted ETFs -- highlighting the focus on managing risk
in today's market.
"We are seeing an increasing amount of interest and usage of
non-market cap weighted solutions among institutions," said Dan
Draper, Invesco PowerShares managing director of global ETFs. "The
study results reveal that more than half of institutional decision
makers agree that smart beta ETFs can be used to manage portfolio
volatility."
Survey respondents identified a number of ETF providers that
offer smart beta products, however, nearly three-quarters (72%) of
current smart beta users indicate PowerShares offers truly
innovative ETFs. Another 62% believe Invesco PowerShares offers a
breadth and depth of ETF offerings, and is a product and service
innovator in the category.
"We've been working diligently to educate investors and to build
awareness for our smart beta offerings. We believe our broad range
of solutions can be used to meet the current and future challenges
of institutional asset managers," Draper added. "We're proud that
the vast majority of smart beta users consider us a leader in the
category and we are committed to providing thought leadership for
investors on this front."
Full research results will be released in the first quarter of
2014.
About The Study The data contained within this analysis was
collected from 193 participants between September 5 and October 2,
2013. A 15-minute online survey was administered by Cogent
Research, a division of Market Strategies International, to
institutional decision makers, including pensions,
endowments/foundations, non-profit institutions, mutual funds, as
well RIAs who manage institutional assets. All institutions had at
least $20 million in assets and allocated at least 1% of their
assets to ETFs. Institutional RIAs had at least $25 million in
assets under management -- a portion of which was managed on behalf
of institutional investors.
Invesco PowerShares is not affiliated with Cogent Research, a
division of Market Strategies International. Cogent Research is an
independent full-service market research and consulting firm,
specializing in wealth management. Cogent Research was hired by
Invesco PowerShares to conduct the research used in the creation of
this study. Respondents were not made aware of Invesco PowerShares'
involvement in this research initiative.
About Invesco PowerShares Capital Management LLC and Invesco,
Ltd. Invesco PowerShares Capital Management LLC is leading the
Intelligent ETF Revolution® through its family of more than 140
domestic and international exchange-traded funds, which seek to
outperform traditional benchmark indexes while providing advisors
and investors access to an innovative array of focused investment
opportunities. With franchise assets over $87 billion as of
September 30, 2013, PowerShares ETFs trade on both US stock
exchanges. For more information, please visit us at
invescopowershares.com or follow us on Twitter @PowerShares.
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
Glossary & Terms Beta: is a measure of risk representing how
a security is expected to respond to general market movements. For
example, a beta of one means that the security is expected to move
with the market. A beta of less than one means the security is
expected to be less volatile than the overall market. Betas greater
than one are expected to exhibit more volatility or movement than
the general market.
Market-Cap-Weighted: A type of index in which individual
components are weighted according to market capitalization. Index
value can be calculated by adding the market capitalizations of
each index component and dividing that sum by the number of
securities in the index.
Smart Beta: An alternative and selection index based methodology
that seeks to outperform a benchmark or reduce portfolio risk, or
both. Smart beta funds may underperform cap-weighted benchmarks and
increase portfolio risk.
Volatility: the annualized standard deviation of monthly index
returns.
General Risk Information There are risks involved with investing
in ETFs, including possible loss of money. Index-based ETFs are not
actively managed. Investments focused in a particular industry are
subject to greater risk, and are more greatly impacted by market
volatility, than more diversified investments.
Shares are not actively managed and are subject to risks similar
to those of stocks, including those regarding short selling and
margin maintenance requirements. Ordinary brokerage commissions
apply. The Fund's return may not match the return of the Underlying
Index.
An investor should consider the Funds' investment
objectives, risks, charges and expenses carefully before investing.
For this and more complete information about the Funds call 800 983
0903 or visit invescopowershares.com for a prospectus. Please read
the prospectus carefully before investing.
Media Contacts: Kristin Sadlon Porter Novelli 212-601-8192 Email
Contact Bill Conboy 303-415-2290 Email Contact
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