The Smart Beta (or Strategic Beta) Revolution is here, and it’s up to advisors to get on board and give in to the adverse nature of the strategy, said Jason Hsu, founder and chairman of Rayliant Global Advisors, during his presentation at the Morningstar ETF Conference in Chicago.
What’s even better now, he said, is smart beta ETFs allow advisors to access the strategy at a low cost.
He further pushed the crowd by stating big institutional clients have already moved into strategic beta funds, adding they are, in fact, pushing out expensive active managers and replacing them with low cost smart beta ETFs. “This means lower fees on the entire portfolio and probably better performance,” he said.
• Consultant Towers Watson doubled its smart beta AUM from $20 billion to $46 billion in the last two years.
• Morningstar shows $300 billion in smart beta products.
• 40% of big pensions in Europe and UK and 20% in the U.S. have adopted the style in some form.
• Half of smart beta users have allocated 10% of their equity portfolio, and 60% will continue to add to that exposure.
• About 75% of asset owners have used smart beta to replace their passive products, taking share from traditional flow, and 64% of investors are replacing some of their active products.