By Nicolas Rabener, Founder, FactorResearch

BlackRock estimates that smart beta ETFs will reach $1 trillion in assets by 2020 and $2.4 trillion by 2025. Smart beta is based on factor investing research, which categorises stocks into groups with similar attributes. Although smart beta is based on factor investing and many investors take smart beta as proxies for factors, these are fundamentally different products. In this short research note we will compare the returns of smart beta ETFs and factors.

Harvest Fund Management has launched the Harvest FTSE China A50 Index ETF on Shanghai Stock Exchange, offering investors a new channel to participate in the growing blue-chip market in China. The fund is the first domestically listed ETF to track a FTSE Russell index.

Charles Schwab has filed a regulatory request with the Securities and Exchange Commission (SEC) to list its first ETF since 2013. The fund, named the Schwab 1000 Index ETF, will track an in-house index composed of the largest 1,000 US stocks by market cap putting the fund in direct competition with ETFs that track the Russell 1000 Index.

Legg Mason has launched a multi-factor ETF that gives exposure to small-cap US equities. The Legg Mason Small-Cap Quality Value ETF (Nasdaq: SQLV) tracks the Royce Small-Cap Quality Value Index, which has been developed by small-cap specialists Royce & Associates.

BlackRock has launched the iShares Russell 2500 ETF (SMMD) on Bats’ ETF MarketPlace, providing exposure to mid- and small-cap US equities. The fund may find favour with investors looking to avoid the potentially overvalued tech-heavy large-cap segment of the US equity market.

FTSE Russell has launched the FTSE Blossom Japan Index, tracking the performance of Japanese firms which have scored highly in an analysis of their environmental, social and governance (ESG) practices. The index may be used as a benchmark for discretionary fund management or as the underlying for investment products including ETFs.

Lyxor has launched two new multi-factor smart beta ETFs, providing exposure to US and UK equities, that give investors exposure to the quality, low volatility and high dividend factors. Each fund has a total expense ratio of 0.19%, pricing the funds as some of the lowest cost income-based ETF strategies available in Europe. Adam Laird, head of ETF strategy, Northern Europe, Lyxor, commented: “Particularly in this environment of low yields, the lower charges on ETFs mean more of the dividend goes to the investor.”

FTSE Russell has posted its official preliminary lists of companies set to enter or leave its Russell US Indices ahead of their annual rebalance after markets close on 23 June 2017. 

Intercontinental Exchange (ICE), the owner of NYSE, has agreed to acquire the index business of Bank of America Merrill Lynch (BofAML). The acquisition, which includes more than 5,000 indices, significantly enhances the firm’s fixed income indexing capabilities at time when bond ETFs are experiencing exponential growth.

London Stock Exchange Group (LSEG) has agreed to acquire The Yield Book and Citi Fixed Income Indices from Citigroup for $685 million in cash. The acquisition represents a significant opportunity for LSEG to enhance its fixed income data and analytics capabilities and strengthen its FTSE Russell index franchise, bringing an increase in benchmark AUM of around $2 trillion. The deal substantially bolsters FTSE Russell’s footprint and product offering in the fixed income space – one of the fastest-growing segments of the ETF industry – and follows the acquisition of the Russell Indexes business in 2014.