Did Strategic-Beta Products Pass the Test?
Lackluster recent performance may accelerate the category’s maturation.
After a decade-plus of strategic-beta exchange-traded products growing more rapidly than the broader ETP market, the space’s market-share gains have stalled. Strategic-beta ETPs’ growth was driven by new cash flows, new launches, the entrance of new players, and a roaring bull market, but more recently, this market segment has begun to show signs of maturity. New product launches have dwindled, closures have become more frequent, fees have come under pressure, and flows have slowed.
The coronavirus-driven sell-off earlier this year roiled markets, reinforcing important lessons about strategic-beta approaches to portfolio construction and teaching some new ones about how these products perform under stress.
Ben Johnson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.