UBS GAM upbeat on 'smart beta' ETFs
UBS Global Asset Management (UBS GAM) is forecasting significant growth in so-called "smart beta" exchange-traded funds (ETFs) on the back of increased levels of adviser and self-managed superannuation fund (SMSF) interest.
While smart beta ETFs make up around only 10 per cent of the Australian ETF market at the current time, UBS GAM ETF capability manager Stephen Small said he expected this to double by the end of the year.
"These funds have gained popularity as investors respond to the limitations of traditional market cap index funds, in that they have a concentrated exposure to a small number of large cap companies and the individual sectors making up the largest portion of the index," he said.
Small said the 'smart beta' approach avoided this by weighting portfolios based on factors other than the size of the underlying companies, such as dividend yield, value factors or buy recommendations.
"This strong growth in smart beta ETFs, such as minimum volatility funds, has already commenced in other markets around the world, particularly in the US and Europe," he said.
Small claimed smart beta represented the natural evolution of ETF, and UBS GAM believed that Australia, being likened to the Canadian market which now sits at over $50 billion in total ETF Funds Under Management (FUM), could expect similar traction.
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