Index funds became popular over the last four decades because they're simple, conservative and low cost. A different kind of exchange-traded fund is drawing record cash by promoting better returns with the same stocks.
Known by names such as smart beta and fundamental indexing, they weigh stocks differently — by focusing on dividends or sales, for instance. Supporters are quick to note that some methods, such as eliminating price rankings, result in returns that beat the Standard & Poor's 500 Index over the last five years. They're slower to note that fees can be 10 times higher than a traditional ETF.
“It feels like an inflection point for these strategies,” Daniel Pytlik, who helps oversee $288 billion at Bank Julius Baer & Co. in Zurich, said. “There seems to have been an acceleration of both demand for and supply of smart beta. Lots of things are going on in terms of the debate around the topic.”
ETFs guided by the philosophy that you can boost performance by changing the way benchmark measure
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