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Survey results: Smart beta deepening & broadening among asset owners

Smart beta adoption among institutional investors is deepening and becoming more broad-based according to a new FTSE Russell global institutional market survey. The Smart Beta: 2015 Global Survey Findings from Asset Owners survey confirms a significantly increased interest in and adoption of multiple smart beta strategies among institutional asset owners, underlining the importance of ongoing education and information surrounding the myriad of smart beta methodologies available in the market today. For purposes of the survey, smart beta is defined as an index-based investment strategy that is not traditionally market capitalization weighted (i.e., fundamental weighted, equal weighted, factor weighted, optimized, etc.).

The 2015 results reveal significant expansion of smart beta allocations in a relatively short period of time. Allocations include using a smart beta index as a benchmark for active management as well as passively managed allocations. For example, in 2014, 38% of the survey respondents with an allocation to smart beta index strategies had allocated 10% or more of their organization’s equity portfolio to smart beta. In 2015, more than half (55%) of survey respondents are allocating more than 10% to smart beta strategies.

In addition, the number of asset owners using multiple smart beta strategies has grown. In 2014, 59% of the asset owners responding to the survey were using more than one strategy; in 2015, 71% are using more than one strategy, and 22% of those respondents are using four or more strategies.

These differences highlight not only a growing allocation to smart beta strategies, but also a growing sophistication and movement toward combining multiple factor and strategy indexes.

Looking across regions, the strongest adoption was seen in Europe where asset owners with $10B or more in AUM lead the adoption of smart beta. Also in Europe, 79% of asset owners have evaluated smart beta, and only 2% did not anticipate evaluating smart beta strategies in the next 18 months – while in North America, 61% of asset owners have evaluated smart beta, and just 23% did not expect to evaluate it in the next 18 months.

A strong indicator for future smart beta adoption growth was found across North America, where those with between $1B and $10B in AUM indicated they were most likely to evaluate smart beta for the first time over the next 18 months.

To learn more about asset owners’ feedback and utilization of smart beta, review the complete findings here: FTSE Russell 2015 Smart Beta Survey Report.



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