The study, conducted by State Street Global Advisers (SSgA), surveyed 300 institutional investors from North America and Europe to measure the uptake and implementation of advanced beta strategies.
The research revealed 75 per cent of the investors surveyed regard advanced beta strategies as an attractive alternative to both active and passive fund management.
State Street explained advanced beta or smart beta combines rules-based investment strategies with the benefits of traditional indexing such as transparency, objectivity, low cost and diversification.
SSgA chief investment officer Lynn Blake said advanced beta strategies play an important role in “helping investors to construct holistic investment strategies while keeping risk and costs in check”.
“Our study found that more than half of institutional investors in North America and Europe will be using advanced beta strategies in the near future,” she said.
SSgA head of the Americas institutional client group, Kristi Mitchem, said many investors believe similar returns can be achieved at a lower cost than traditional active management with beta strategies.
However, Vanguard principal for marketing strategy and communications, Robin Bowerman, is sceptical of such strategies, voicing concerns that beta strategies are being marketed as index funds when in reality they are anything but.
“It’s about packaging something up as indexing when really it’s an active bet against the market return. You may outperform or you may underperform – it depends,” he said.
Despite this, Ms Blake believes the “recent spike in market volatility, and a reduced appetite for active strategies,” will see the adoption of advanced beta strategies continue.
