Hottest Smart Beta ETFs This Year

June 26, 2017

[This article appears in our August 2017 issue of ETF Report.]

Smart beta is a very broad category, comprising some 800 different ETFs that set out to offer investors alternatives to the market-cap view of the world.

So far this year, these funds have attracted nearly $40 billion in assets under management (AUM), according to FactSet data.

We take a look at some of the most popular smart-beta ETFs this year.

Popularity Winner

The Vanguard Value Index Fund (VTV) is the most popular smart-beta ETF so far this year, seeing net inflows of $3.43 billion year-to-date.

The fund is the second-largest value ETF on the market today, with $32 billion in total AUM, behind only the $37 billion iShares Russell 1000 Value ETF (IWD), which has seen net creations of about $644 million so far in 2017.

The fund tracks an index from CRSP that relies on five different value metrics to evaluation components. VTV’s big upper hand over IWD is its price tag: 0.06% in expense ratio versus IWD’s 0.20%—that’s less than a third of the cost.

What’s amazing about VTV’s asset haul so far this year is that, first of all, no other smart-beta ETF has come even close to that asset gain. Secondly, value as a risk factor hasn’t really been performing that well in 2017. In fact, value has underperformed the broad market as well as growth, as the chart below plotting VTV against VOO and VUG shows. 

 

 

Perhaps VTV’s impressive asset haul is a testament to something that’s often said in investing circles: Value investors are patient investors, as they know capturing value takes time.

 

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