Demand for smart beta indices across Europe is growing, according to research by exchange-traded fund (ETF) provider, Invesco PowerShares.
The study found that, by 2017, the percentage of assets invested into smart beta products is expected to reach 18%, double the allocation at the beginning of 2014.
Respondents based in Germany, Italy and Switzerland expected at least a 100% increase in allocations, while those based in the UK, expected an increase of just under 70% by 2017.
The research, which targeted 112 traditional market cap weighted index and smart beta index users in Germany, Italy, Switzerland, and the UK, revealed positive attitudes towards smart beta, with 56% of respondents saying they would consider investing more in these strategies.
In 2013, smart beta ETFs captured nearly a third of industry inflows and contributed a record $65.1 (€52.3 billion) billion globally, according to research by BlackRock. Additional finding from Deutsche Bank have shown that the European market in smart beta ETFs has more than doubled in 2014, reaching €4.6 billion between January to September.
The study by Invesco PowerShares’, part of investment management company Invesco, also found that smart beta strategies are increasingly being used to compliment active management. Just under a third of the participants who already use smart beta described it as an appealing new space between active and passive management, while 29% said it complements active strategies.
In comparison to other non-market cap weighted indices, 57% of respondents said fundamentally-weighted indices provide a more representative picture of the market, while two thirds said they believe that indexing strategies are increasingly important to their business.
However, respondents also acknowledged that the industry needs to invest in better education to support the growth of smart beta as a mainstream investment style.
Bryon Lake, head of Invesco PowerShares, Europe the Middle East and Africa, says that Europe is ready to take advantage of the benefits of smart beta strategies.
“Not only are investors no longer forced to choose only from the market-cap weighted indices universe, but smart beta is very much seen to complement existing strategies in place,” he says.
He adds that strong opportunities will be found in the UK, Italy, Germany and Switzerland and in the institutional market, as the products become increasingly mainstream.
Read more on smart beta in Funds Europe’s Smart Beta 2014 Report.
©2014 funds europe
