Assets under management for exchange-traded funds (ETFs) jumped to another record in 2017. The same can be said of smart beta funds, which have consistently posted growth rates that exceed those of the broader ETF industry. "Assets invested in Smart Beta ETFs and exchange-traded products (ETPs) listed globally increased by 32.3% during 2017 to reach a new high of $658.35 billion at the end of December," said ETFGI, a London-based ETF research provider.
Last year, smart beta ETFs had net inflows of $71.75 billion. However, the growth rate of cap-weighted ETFs outpaced that of smart beta. None of the top 10 U.S.-listed ETFs in terms of new assets added in 2017 were smart beta funds. "Assets in market cap ETFs increased by 40.3% in 2017, which is significantly more than the 32.3% increase in Smart Beta assets," said ETFGI. (See also: ETFs Are Trouncing Previous Inflows Records.)
In the U.S., the world's largest ETF market, there are over 1,000 smart beta ETFs with nearly $834 billion in combined assets under management. The largest smart beta ETF trading in the U.S. is the iShares Russell 1000 Growth ETF (IWF), which had $42.5 billion in assets as of Jan. 26. "Assets invested in Smart Beta ETFs/ETPs listed globally grew by a record $160.61 billion during 2017, almost double the previous record of $87.41 billion set in 2016," said ETFGI. "The increase of 32.3%, from $497.74 billion at the end of 2016, also represents the greatest growth in assets since 2009 when markets recovered following the 2008 financial crisis."
In terms of new assets added last year, the leader among U.S.-listed smart beta ETFs was the Vanguard Value ETF (VTV), with nearly $5.1 billion in 2017 inflows. The iShares Edge MSCI USA Momentum Factor ETF (MTUM) added over $3.3 billion of its $7.25 billion last year. The Vanguard Growth ETF (VUG) and the iShares Edge MSCI Min Vol USA ETF (USMV) round out the top four U.S. smart beta ETFs for 2017 net inflows. Of the top 20 asset-gathering smart beta ETFs in the U.S. last year, nine were iShares funds, while Charles Schwab and Vanguard combined for seven of the remaining 11 funds on the list. (For more, see: Advisors Are Increasing Smart Beta Use.)
"Value Factor ETFs/ETPs listed globally saw net inflows of $2.63 billion in December, growing net inflows for 2017 to $16.66 billion," said ETFGI. "Multi Factor ETFs and ETPs gathered net inflows of $1.41 billion in December, bringing net inflows for 2017 to $12.85 billion." Of the 20 largest U.S.-listed smart beta ETFs, 11 are growth or value funds. (For additional reading, check out: Cheap Matters With Smart Beta ETFs, Too.)