Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor may not get back the amount originally invested.
Smart beta ETFs provide investors with the ability to access factors in a simple and transparent investment vehicle
What is smart beta?
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In our pockets, we now hold the ability to summon a car, monitor our health, and make a restaurant reservation. Advances in data and technology are driving innovation, bringing scale to reduce cost, and transforming our lives.
But, how is this relevant to our investments?
We’ve learned from painful experiences that traditional ways of investing might not have truly protected us. And it’s hard to select investments.
We need a new way. Factor investing can help.
Powered by data and technology, coupled with fundamental investment ideas, that new way of investing may be here. But what are factors?
As long as there have been markets, investors have bought cheap, trending, high quality, small, and lower risk stocks. These simple strategies are what we now call factor investing.
Factors are to securities what nutrients are to food. For example, just as milk contains fats and protein that contribute to its nutritional value, a stock might have value and momentum attributes that drive its returns.
And just as people have different nutritional needs, investors may need different factor exposures. Nutrients power you; factors power your portfolio.
Factors aren’t new. They have been around for decades and are grounded in rigorous, Nobel-prize winning research, but were primarily available through actively managed mutual funds.
The innovation is not the investment ideas themselves. It’s in the way we access those investment ideas.
Smart Beta Exchange Traded Funds capture the power of factors and deliver it in cost and tax efficient ETFs, revolutionizing the way investors access these rewarded investment ideas.
Smart Beta is here to stay. Smart Beta. A new way.
Introducing Factors
- Factors – are present in all portfolios
- Factors are not new. Academic research since the 1930s has systematically identified factors as a driver of returns within and across asset classes, as well as across markets and countries. Did you know that 6 Nobel prizes have been awarded to factor investing?1
- What is new is the way we access these investment ideas, such as through smart beta exchange traded funds (ETFs). Smart beta ETFs provide investors with the ability to access factors in a simple and transparent investment vehicle.
1Source: Nobel Prize as of October 2019. Nobel prizes were awarded in 1970, 1981, 1990, 1997, 2013, 2017. There can be no guarantee that the investment strategy can be successful and the value of investments may go down as well as up.
How can you use smart beta?
- Seek reduced volatility: Minimum volatility ETFs provide investors with the ability to remain fully invested in the equity markets, while seeking lower levels of volatility than the broad market.
- Seek enhanced returns: Single and multifactor ETFs provide investors with access factors, which have been associated with driving long-term performance.
EXPLORE iSHARES SMART BETA ETFs
Single factor
Multifactor
Minimum Volatility
| Smart Beta Strategy | What does it do? | Example Products |
|---|---|---|
| Minimum Volatility | Targets stocks that exhibit a lower level of volatility than their peers. | MVOL, SPLV, EMLV, MVEU |
| Multifactor | Seeks to provide diversified exposure to a variety of factors that have been identified as drivers of long-term performance: momentum, quality, size and value. | IFSW, IFSU, IFSE |
| Single Factor | Targets exposure to a factor that has been a long-term driver of returns, such as momentum, quality, size and value. | IWVL, IUVL, IWMO, IWQU, IWSZ |
Risk: There can be no assurance that performance will be enhanced or risk will be reduced for funds that seek to provide exposure to certain quantitative investment characteristics ("factors"). Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. In such circumstances, a [fund/strategy] may seek to maintain exposure to the targeted investment factors and not adjust to target different factors, which could result in losses.
Risk: The fund should not be considered low risk in absolute terms and may not be suitable for cautious investors.
MINIMUM VOLATILITY AND ESG
Learn about integrating minimum volatility and ESG into your investment processes
Explore Factor use cases
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![Seek outperformance with Multi-Factor]()
Smart Beta Case StudySeek outperformance with Multi-Factor
Find out how you can seek enhanced performance with Multi-Factor ETFs.
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![Factors making waves]()
SMART BETA CASE STUDYFactors making waves
In this article Dr Andrew Ang explains how factors are making waves.
