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The past three years have been a period of substantial growth in passive strategies across mutual funds and ETFs. Smart (or strategic) beta and traditional market cap-weighted passive products have seen similar asset growth, 64 percent and 65 percent respectively, while traditional passive has maintained a roughly five-to-one asset advantage over smart beta.
Broadridge combined our channel data with Morningstar’s strategic beta attribute to see which channels have been the most fruitful for smart beta manufacturers and which ones need more attention. In terms of asset growth, independent broker-dealers sit atop the channels where they’ve seen smart beta assets double over the past few years. Bankers (both private and retail) and warehouses have been less interested and their smart beta assets have grown 20 to 40 percent — solid figures, but well down the list. The trust company and RIA channels have actually seen smart beta growing about three percent faster than traditional passive.
The most enthusiastic channel may be the retirement space, where traditional passive has been the very slowest and smart beta assets have grown over 65 percent. The retirement channel controls a small portion — about two percent — of all smart beta assets and depends almost entirely upon mutual funds as a preferred vehicle. Fund managers already in the retirement space will find a receptive audience for new products that demonstrate the factor-style investing that DC plans crave today.
Learn more in this week's Insight of the Week.