Posted inAnalysisUnited StatesEurope

Americans like it stupid, Europeans prefer smart

While virtually all American investors have an allocation to standard index-trackers, only one in five are invested in smart beta funds. In Europe, this percentage is twice as high, and among large institutional investors with more than $10bn in assets under management, more than two thirds use smart beta products.

These large institutional managers use smart beta mainly for strategic reasons, while their ‘stupid’ counterparts are more likely to be used for tactical asset allocation. The Netherlands is a front runner when it comes to factor-based investing. According to EIE data, some 70% of local fund selectors use smart beta strategies.

“Smart beta is the core of our portfolios. Depending on the risk budget of the client, 30% to 70% of our client portfolios consist of smart beta,” says Sven Smeets, head of fund selection for Altis, a fiduciary asset manager in The Netherlands.

The majority of respondents to the survey use multiple smart beta strategies simultaneously. Fundamental strategies are most popular with investors who use a single smart beta strategies, while low-volatility and value prevail with investors who use multiple strategies. Interestingly, investors are split on the question whether smart beta strategies should be considered active or passive (see chart above). 

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Part of the Bonhill Group.