European institutions embrace smart beta

Indices_boardEuropean institutional investors are adopting smart beta indices at a faster rate than American institutions, research that charts the growth of these alternative indexing strategies finds.

Adoption of smart beta is also more broad based in Europe.

A study by FTSE Russell shows that 79% of European asset owners have evaluated smart beta compared to 61% in North America in the past year.

In Europe only 2% of asset owners do not anticipate evaluating smart beta strategies in the next 18 months – while in North America the figure is 23%. However, North American asset owners with between $1-10 billion (€0.9-9.0 billion) of assets are among those most likely to evaluate smart beta for the first time over the next 18 months.

Smart beta, also known as enhanced index investing, is being adopted around the world, FTSE Russell says in its Smart Beta: 2015 Global Survey Findings from Asset Owners.

The 2015 results reveal a significant increase in smart beta allocation in a relatively short period of time. In 2014, 38% of the survey respondents with an allocation to smart beta strategies had allocated 10% or more of their organisation’s equity portfolio to smart beta strategies. In 2015, the figure has risen to 55%.

Rolf Agather, managing director of North America research for FTSE Russell, says: “Smart beta indexes have given asset owners and their consultants more choice and greater flexibility in the tools available for constructing portfolios with an outcome-oriented focus. But increases in choice and flexibility mean that investors require more information as they work to make their decisions.”

He says institutional asset owners are increasingly using more smart beta indices and in a variety of new ways.

“This is outstanding for the industry, but reinforces the need for further education, information and advice.”

The survey covered 214 asset owners predominantly from North America and Europe, with total assets of about $2 trillion.

©2015 funds europe