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Overcoming ETF concerns with multi-factor smart-beta strategies

Tan Zhai Yun
Tan Zhai Yun10/1/2018 07:30 AM GMT+08  • 8 min read
Overcoming ETF concerns with  multi-factor smart-beta strategies
SINGAPORE (Oct 1): Exchange-traded funds have attracted their fair share of criticism, including allegations that they push up the valuations of certain stocks with no regard for their fundamentals. On the back of these concerns, multi-factor smart-beta E
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SINGAPORE (Oct 1): Exchange-traded funds have attracted their fair share of criticism, including allegations that they push up the valuations of certain stocks with no regard for their fundamentals. On the back of these concerns, multi-factor smart-beta ETFs have gained popularity as they combine both passive and active strategies to avoid some of the risks associated with regular ETFs.

According to London-based research and consultancy firm ­ETFGI, assets invested in smart-beta ETFs and exchange-traded products reached a record US$696 billion ($950 billion) as at end-January. Multi-­factor smart-beta products saw the largest net inflows, followed by smart-beta ETPs that only use the value factor. ETPs include products such as exchange-traded notes.

Multi-factor smart-beta ETFs can be an alternative for investors seeking better risk-adjusted returns from their passive investments, says Chandra Seethamraju, senior vice-president and head of smart beta and overlay strategies at Franklin SystematiQ, the quantitative hub of Franklin Templeton Multi-­Asset Solutions.

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