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Have Strategic-Beta ETFs Delivered For Investors? -Morningstar

FinalytixResearch Have Strategic-Beta ETFs Delivered For Investors? -Morningstar

Have Strategic-Beta ETFs Delivered For Investors? -Morningstar

Have Strategic-Beta ETFs Delivered For Investors?

by Ben Johnson, CFA, Director, Global ETF Research and Editor, Morningstar, June 2017

Conclusion:

Strategic-beta ETFs attempt to marry the best attributes of active and passive approaches to security selection. Their undeniable advantages over the majority of their actively managed peers include their relatively lower fees, greater tax efficiency, and the absence of idiosyncratic risk—namely key-person risk. Despite their advantages, on average, these funds aren’t a clear improvement over their cap-weighted counterparts. All we can say for certain is that they will deliver a risk/return profile that differs from the market. So, like their active peers, they will experience cycles of relative out- and underperformance. Ultimately, whether or not investors reap the benefits of investing in these strategies depends on their ability to stick with them through thick and thin.

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