More than 60 Percent of Investors See Advanced Beta as Viable
Alternative for Active Management
According to a new State Street Global Advisors (SSgA), study1,
“Beyond Active and Passive, Advanced Beta Comes of Age,” advanced
beta strategies are playing a more influential role in some of the
world’s largest portfolios. Forty-two percent of investors
currently use advanced beta and another 24 percent plan to do so
over the next three years.
Advanced beta, also referred to as smart beta, combines elements
of alpha and beta in that it seeks to capture performance through
targeted, rules-based investment strategies, while retaining the
benefits of traditional indexing, including transparency,
objectivity, low cost and diversification. Seventy-five percent of
the investors surveyed said that the strategies are an attractive
alternative to both active and passive fund management and a
powerful evolution in asset allocation strategies.
“Advanced beta strategies play an important role in helping
investors to construct holistic investment strategies while keeping
risk and costs in check,” said Lynn Blake, CIO, global equity beta
solutions at SSgA. “Our study found that more than half of
institutional investors in North America and Europe will be using
advanced beta strategies in the near future. The recent spike in
equity market volatility, and a reduced appetite for active
strategies, may encourage further adoption of advanced beta based
on its track record of improving risk adjusted returns.”
Key findings:
- Although advanced beta is often
marketed as an alternative to cap-weighted indexing, many investors
see advanced beta as a replacement for active and are three times
more likely to fund an advanced beta allocation from active rather
than passive
- Europe is ahead of US institutional
investors in adoption, allocation and measurement of advanced beta
strategies with 25 percent of European respondents allocating 20
percent or more of equities in their portfolio to advanced beta as
compared to four percent for North American respondents
- Nearly 40 percent of investors with a
current allocation to advanced beta strategies are using
low-volatility and low-valuation, either combined or
separately
- While seventy percent of investors
report high levels of awareness about advanced beta, only 40
percent are confident about implementation
“The main advantage that advanced beta strategies provide is the
ability to select a portfolio that best meets specific risk and
return objectives, versus taking a one-size-fits-all approach,”
said Kristi Mitchem, executive vice president and head of the
Americas institutional client group at SSgA. “While we are still on
the early part of the adoption curve with these strategies,
investors are becoming aware that similar returns can be achieved
at a lower cost than traditional active management. That is a trend
that can’t be ignored.”
The study surveyed 300 institutional investors from North
America and Europe to measure adoption and implementation of
advanced beta strategies. To see the full-results, please click
here.
About State Street Global Advisors
State Street Global Advisors (SSgA) is a global leader in asset
management. The firm is relied on by sophisticated investors
worldwide for its disciplined investment process, powerful global
investment platform and access to every major asset class,
capitalization range and style. SSgA is the asset management
business of State Street Corporation, one of the world’s leading
providers of financial services to institutional investors.
1State Street Global Advisors commissioned Longitude Research to
conduct a survey of 300 institutional investors including public
and private pension funds, endowments, foundations, insurance
companies and private banks. Respondents were from North America
and Europe and represent institutions with more than $1 billion in
assets. In addition to the survey, a series of in-depth interviews
with senior professionals in the institutional investor community
also occurred.
Investing involves risk including the loss of principal. The
views expressed in this material are subject to change based on
market and other conditions. This document contains certain
statements that may be deemed forward-looking statements. Please
note that any such statements are not guarantees of any future
performance and actual results or developments may differ
materially from those projected.
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Limited. Authorised and regulated by the Financial Conduct
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32066 100, Facsimile: 39 02 32066 155. SSgA Italy is a branch
office of State Street Global Advisors Limited. State Street Global
Advisors Limited is authorised and regulated by the Financial
Conduct Authority in the United Kingdom.
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Boston, MA 02111-2900
CORP-0948
State Street CorporationElizabeth Bartlett, +1
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