Smart Beta: A Deeper Look at Asset Owner Perceptions (Russell Investments)

KEYWORDS: beta, smart beta, North America, Volatility, index, asset managers, Consultants, European Union, alternative investment

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SUMMARY OF KEY THEMES:
Smart beta is taking off with a strong outlook, even if there is little consensus on what to call it
› Preferred smart beta definition focuses on alternative ways to construct market exposure, but there is no agreement on “name”
› Smart beta adoption is happening, and happening broadly
› Europe leads in smart beta adoption
› The outlook for increased adoption and usage of smart beta is strong
Role definitions overlap: Who is driving smart beta adoption and evaluation – the asset manager, or the consultant?
› Asset managers play a key role in asset owners’ evaluation of smart beta strategies
› Consultants are not driving the demand for smart beta in North America to the extent that they are in Europe
Early smart beta adopters favor fundamental and low- volatility index strategies; going forward, greatest unmet need is for exposure control
› Low-volatility and fundamental index strategies dominate, but there are large regional differences in adoption
› Greatest unmet need is for smart beta indexes that control exposures

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