A survey finds that smart beta indexes are being sought by institutional investors for their investment utility, helping to achieve broader portfolio objectives such as risk reduction and return enhancement more than basic cost savings.
The Russell survey finds that nearly one-third (30%) of Canadian plans are currently evaluating smart beta strategies, compared with 11% of non-Canadian respondents.
Low-volatility and fundamentally weighted index strategies dominate institutional investors’ radar globally, but there are large regional differences in which strategies are more popular and how they are used.
For example, all of the Canadian respondents that are currently using smart beta indexes are using low-volatility strategies, versus less than half (48%) of non-Canadian respondents using these strategies. And 86% of those Canadian investors surveyed that are evaluating smart beta indexes are evaluating low-volatility strategies, compared with 64% outside Canada.
Among Canadian investors surveyed, risk reduction was cited 86% of the time as an objective leading to evaluation of smart beta strategies, while return enhancement was cited 43% of the time. This compares with 59% for risk reduction and 65% for return enhancement among non-Canadian respondents.
“Indicative of the current pension landscape in Canada, survey findings indicate that Canadian investors are most interested in smart beta indexes for volatility control and risk reduction,” says Greg Nott, chief investment officer for Russell Investments Canada.
“The results of this new survey reinforce that institutional investors’ growing interest in and adoption of smart beta strategies has driven the need for additional information, education and advice on how to best implement these strategies.”
Of the 181 survey respondents, 24 were Canadian investors. Of the Canadian respondents, 80% have assets greater than $1 billion, 20% have assets above $10 billion, and 80% have DB plans.
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