Smart beta ETFs and Australian equity ETPs enjoyed a record year in 2016 as investors sought alternative investment strategies, according to VanEck.
The company said total flows in to the smart beta ETF sector reached $563 million, close to 20 per cent of the total $3.06 billion flows for Australian exchange-traded products (ETP) during the year.
“Smart beta strategies provide an alternative passive approach to traditional market capitalisation indices,” said VanEck managing director Arian Neiron.
“There was considerable market volatility in 2016 and smart beta strategies, such as equal weight, quality, value and fundamental weighting, provided investors with the opportunity to achieve targeted outcomes and higher risk-adjusted returns.”
By the end of November 2016, global total investments in smart beta equity ETPs and ETFs reached US$497 billion, VanEck said, a new record for the industry.
Mr Neiron said that smart beta ETPs were “the fastest growing segment of the investment management industry” at present and that this growth will likely continue in 2017, adding that more of these products will be launched in different asset classes.
Domestically, the Australian ETP industry grew 20 per cent from 2015 to reach a record high $25.6 billion, with total inflows into Australian equity ETPs surpassing international equity ETPs for the first time in “several years”, VanEck said.
“Speculation leading up to the US election and ongoing market volatility particularly encouraged investors’ love affair with Australian equites in 2016,” Mr Neiron said.