Lyxor: European Smart Beta ETF Market Trends: Year To Date 2015 in brief

European Smart beta ETF market flows are positive in the third quarter of 2015 as accelerated growth in September contrasts with negative flows in August 2015. NET NEW ASSETS (NNA)..

By Marlène Hassine – Head of ETF Research – Lyxor ETF and François Millet, Head of Index Product Development Lyxor

year to date (until 30/09/2015) amounted to EUR3.0bn, 77% of the 2014 NNA. Total Assets under Management are up 37% vs. the end of 2014, reaching EUR 10.7 billion. Year to date, Smart Beta ETF flows are mainly focused around Fundamental, Minimum volatility and Multifactor ETFs, with the latter two respectively benefitting from increasingly volatile markets and investors’ search for diversification.

■ Smart Beta ETFs definition: Smart beta are rules-based investment strategies that do not rely on market capitalization. To classify all the products that are included in this category we have used 3 sub segments. First, risk based strategies based on volatilities, and other quantitative methods. Secondly, fundamental strategies based on the economic footprint of a firm – through accountant ratios- or of a state – through macro-economic measures. Then factor strategies including homogeneous ranges of single factor products, and multifactor products designed purposely for factor allocation.

■ Q3 2015 is still relatively limited in terms of inflows for Smart beta ETF over the last year. Y et S eptember 2 015 m arked a s ignificant r ebound v s t he n egative fl ows o f August. This in stark contrast with the overall European ETF market where August flows were close to record highs, and September flows were rather low due to the sell-off in China this summer. Against the backdrop of increasing volatility across all markets, risk based ETFs have regained strong interest with   minimum volatility ETFs gathering more than a third of European Smart beta ETF inflows over the quarter. In the factor allocation space, multifactor ETFs continued their positive trend as investors sought new ways to diversify against record high correlations in the traditional asset classes.


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