Cyberattacks against accounting software firm Wolters Kluwer and the City of Baltimore in May showed how the newest wave of malicious hacking can have significant, often...Technologyread more
The European parliamentary election is the second largest democratic exercise in the world.Europe Newsread more
Biden had criticized Kim Jong Un as a "dictator" and a "tyrant" at a recent rally in Philadelphia. North Korean state media responded by calling Biden a "fool of low IQ" among...Politicsread more
Buybacks have gotten a bad rap from both Republicans and Democrats. But stocks would be trading at a massive discount without them.Marketsread more
Fiat Chrysler and France's Renault could soon partner up to take on the sweeping changes to the global auto industry, according to a report in the Financial Times. The...Autosread more
Microsoft shares have gained 133% since November 2015, outperforming a tech "basket of unicorns" over that stretch.Technologyread more
The president's state visit comes amid tensions with carmaker Toyota over potential auto tariffs. Trump has repeatedly threatened Japanese and European carmakers with tariffs.Traderead more
The IRS is about to release a new draft of Form W-4, which will more closely reflect the changes stemming from the Tax Cuts and Jobs Act. For workers, that means they'll need...Personal Financeread more
The Mega Millions jackpot has spilled over $400 million. It would be the ninth largest winning since the game began in 2002.Personal Financeread more
Trump was speaking at a meeting of Japanese business leaders in Tokyo during his state visit to Japan on Saturday.Marketsread more
The biggest U.S. gasoline price surge in years is running out of steam just in time for the start of the summer driving season.Energyread more
CHICAGO — The popularity of so-called strategic beta investment vehicles could be waning as new products launch at a slower pace and pressure to lower fees increases, a Morningstar analyst said Wednesday at the company's annual investment conference.
"The waterfront has been covered. More and more managers are looking to differentiate on price and fewer and fewer new entrants are making their way to the market," said analyst Ben Johnson. "I think we're seeing maturity in this space."
Strategic beta vehicles, also called smart beta, are exchange-traded products that aim to maximize investment returns by reducing risks as much as possible. One example is the Invesco S&P 500 Low Volatility ETF (SPLV), which is made up of stocks that typically have very low volatility, such as Coca-Cola. The fund also owns shares of Aon, a professional services company. Another strategic beta fund, the iShares Edge MSCI USA Quality Factor ETF (QUAL), gives investors exposure to companies with stable earnings growth and low leverage, such as Visa and Lockheed Martin.
These types of products exploded in popularity between 2000 and 2018, Morningstar data shows. In that time, their assets under management expanded to nearly $800 billion from less than $10 billion. Their market share among exchange-traded products also surged to around 20% of all exchange-traded products in that period.
However, market share has stabilized since 2015 while the number of new launches dropped to 59 in 2018 from 85 the year before.
Johnson said increasing pressure to lower fees could be one of the factors keeping new strategic beta products from launching. Asset managers are rapidly slashing fees on mutual funds and exchange-traded funds since high fee levels from the past are now a turnoff for consumers. Last year, Fidelity launched a fund that did not charge any fees.
"Anecdotally, [managers] don't feel like fighting over fees. They have valuable ideas, they have valuable IP, but they don't want to sell it for next to nothing," he said.
Growth in assets under management also slowed to 0.5% in 2018 on a year-over-year basis from 9.7% in 2017.
One area where investors and asset managers could see further growth in products is in the environmental, social and governance space, or ESG. The term refers to investments that could have a positive impact on society. Last year, ESG had record inflows, pushing their assets under management to $89 billion, Morningstar data shows.
"All the things that fall into the ESG bucket certainly have begun to get traction," Johnson said, highlighting the launch of an ESG exchange-traded fund earlier this year. But "I think further adoption is probably further out. Ultimately, that will be facilitated by being able to create a sort of holistic ESG-oriented portfolio."