ETF Talk

Smart-Beta ETF Provides Exposure to Mid- and Large-Caps

The iShares Russell 1000 Value ETF (IWD), at over $36 billion in assets under management, ranks as the biggest smart-beta fund and as one of the most popular currently on the market.

Smart beta “has emerged as one of the most exciting and hotly debated investment trends of the past 10 years,” according to ETF.com. Going by many different names (strategic beta, fundamental indexing, factor investing and more), smart beta is a catchall term for rules-based strategies that aim to deliver better risk-adjusted returns than traditional market-cap-weighted indexes.

Today, there are hundreds of ETFs and, if you count institutional assets, hundreds of billions of dollars benchmarked against smart-beta indexes. One advantage to owning smart-beta-oriented exchange-traded funds (ETFs) is precision risk management.

Investors looking for a perfect balance between risk and return can make a single purchase of a smart-beta ETF and have access to a select portfolio spread across multiple sectors and companies. This scenario can work a lot better than traditional stock picking, where investors looking for a good risk-return combination would have to sift through thousands of stocks and multiple different sectors to find the ideal combination. At the very least, such an undertaking is a difficult juggling act.

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