Asset growth for exchange traded funds (ETFs) is booming this year. Data confirm smart beta funds are getting in on that act. Actually, year-to-date inflows to smart beta ETFs listed around the world shattered previous annual records and that is as of the end of October, meaning with two month's left in 2017, this year's smart beta asset growth should trounce prior years' asset growth.

“Year-to-date, through end of October 2017, Smart Beta equity ETFs and ETPs listed globally saw net inflows of $59.7 billion; 53.% more than net inflows for the same period during 2016, and 6% more than net inflows for the whole of 2016,” according to ETFGI, a London-based ETF research firm.

As is the case with the broader ETF space, a concentrated number of funds currently dominate total smart beta assets. On its own, the Vanguard Value ETF (VTV), the largest smart beta ETF trading in the U.S., had $34.4 billion in assets under management at the end of October, or more than 5% of all smart beta assets.

The 20 largest smart beta ETFs account for nearly half of the assets allocated to fundamentally-weighted ETFs, according to ETFGI data. Of those 20 ETFs, nine are either growth or value funds while three are dedicated to the low volatility factor.

While single-factor and dividend funds are among the giants in the smart beta space, some multi-factor funds are experiencing rapid growth, too. Multi-factor funds are increasingly popular with advisors and investors that are realizing factor leadership varies over different time periods and factor timing is difficult.

For example, the JPMorgan Diversified Return U.S. Equity ETF (JPUS), which debuted in September 2015, had about $316.6 million in assets under management as of the end of the third quarter, of which $155.5 million has flowed into the fund just this year.

“JPUS tracks an index that aims to deliver higher risk-adjusted returns than a traditional market cap-weighted index through broad diversification of risk across sectors and stocks,” according to JPMorgan Asset Management. “The index uses a multi-factor stock screening process that has historically driven strong performance.”

Proving that the multi-factor story translates well to international stocks, the JPMorgan Diversified Return International Equity ETF (JPIN) had almost $1.1 billion in assets under management at the end of the third quarter, of which $526.4 million has arrived in the fund this year.

More than 20 smart beta ETFs have debuted in the U.S. just in the month of November.

 

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