Over 30% of institutional investors who do not currently use smart beta expect to adopt such strategies within two years, according to a recent survey conducted by Source, a European provider of exchange-traded funds.

Dr. Chris Mellor, Executive Director, Equity Product Management at Source.

Following interviews with 49 institutional investors on their attitudes towards smart beta investing, Source found that 27% of respondents currently invest in one or more smart beta strategies, and, of those that don’t, 31% anticipate they will over the next two years.

Some 64% of institutional investors believe assets in smart beta funds will grow between now and 2019 (only 4% think it will decline, with the remainder undecided), and 34% anticipate assets under management in these strategies will increase by 30% or more.

Dividend-weighted strategies are predicted to be a major driver of this growth with 28% of respondents believing investors will increasingly focus on smart beta strategies to enhance the dividends they receive.

Between now and 2019, 57% of institutional investors anticipate that a growing number of ETFs using smart beta strategies will be launched. That being said, many argue that the term smart beta is being misused, and 26% of respondents expect tighter rules to be introduced around what constitutes the term.

Dr. Chris Mellor, Executive Director, Equity Product Management at Source, commented: “Smart beta is going to play a growing role in helping investors find quality stocks that pay an attractive dividend.”