Adoption of Smart Beta ETFs Increasing Among Institutional Asset Managers

Adoption of Smart Beta ETFs Increasing Among Institutional Asset Managers

Independent Research Reveals Use of Low Volatility & High Dividend Strategies Will Escalate

CHICAGO, IL--(Marketwired - Jan 23, 2014) - Today, 1 in 4 institutional investors report using smart beta ETFs, and adoption among non-users is likely to accelerate in the near future, according to a new study conducted by Cogent Research, a division of Market Strategies International. The results reveal that nearly half (46%) of institutional decision makers not currently using smart beta ETFs indicate they are likely to start using the products over the next three years, particularly institutional investors with assets in excess of $500M.

Within the smart beta ETF category, low volatility funds have experienced the greatest growth in 2013: an impressive 99% increase in assets.1 This trend is expected to continue as two-thirds (67%) of institutional decision-makers not currently using smart beta ETFs indicate they are most likely to use low volatility funds moving forward. In addition to low-volatility products, nearly half (46%) of non-smart beta ETF users anticipate using high dividend ETFs and over a third (34%) plan on using fundamentally weighted investment strategies.

"We have been seeing increased interest in smart beta ETFs with various institutional segments, and the research findings confirm that increasingly institutions are implementing smart beta ETFs," said John Hoffman, Invesco PowerShares director of ETF institutional sales and capital markets. "Smart beta ETFs make a lot of sense for institutional investors seeking lower costs, intraday liquidity, increased transparency, ease of implementation, and strategies that go beyond market cap weighting."

Non-users indicate that the primary drivers of future usage include making tactical adjustments to asset allocation (42%), accessing higher beta strategies (40%), portfolio completion (40%), and to reduce portfolio volatility (39%). 

"We educate both users and non-users about the many benefits of PowerShares smart beta ETFs, and these results reinforce our belief that these products are great investment tools for institutional asset managers as well as retail investors," said Dan Draper, Invesco PowerShares managing director of global ETFs. "We're very excited about the future potential of our investment category."

Full research results and analysis can be accessed by visiting PowerShares.com/Institutional.

About The Study The data contained within this analysis was collected from 193 participants between September 5 and October 2, 2013. A 15-minute online survey was administered by Cogent Research to institutional decision makers, including pensions, endowments/foundations, non-profit institutions, mutual funds, as well RIAs who manage institutional assets.

Invesco PowerShares is not affiliated with Cogent Research. Cogent Research is an independent full-service market research and consulting firm, specializing in wealth management. Cogent Research was hired by Invesco PowerShares to conduct the research used in the creation of this study. Respondents were not made aware of Invesco PowerShares' involvement in this research initiative.

About Invesco PowerShares Capital Management LLC and Invesco, Ltd. Invesco PowerShares Capital Management LLC is leading the Intelligent ETF Revolution® through its family of more than 140 domestic and international exchange-traded funds, which seek to outperform traditional benchmark indexes while providing advisors and investors access to an innovative array of focused investment opportunities. With franchise assets over $87 billion as of September 30, 2013, PowerShares ETFs trade on both US stock exchanges. For more information, please visit us at invescopowershares.com or follow us on Twitter @PowerShares.

Invesco Ltd. is a leading independent global investment management firm, dedicated to helping investors worldwide achieve their financial objectives. By delivering the combined power of our distinctive investment management capabilities, Invesco provides a wide range of investment strategies and vehicles to our clients around the world. Operating in more than 20 countries, the firm is listed on the New York Stock Exchange under the symbol IVZ. Additional information is available at www.invesco.com

1 Bloomberg LP, as of December 31, 2013

Glossary & Terms Beta: is a measure of risk representing how a security is expected to respond to general market movements. For example, a beta of one means that the security is expected to move with the market. A beta of less than one means the security is expected to be less volatile than the overall market. Betas greater than one are expected to exhibit more volatility or movement than the general market.

Market-Cap-Weighted: A type of index in which individual components are weighted according to market capitalization. Index value can be calculated by adding the market capitalizations of each index component and dividing that sum by the number of securities in the index.

Smart Beta: An alternative and selection index based methodology that seeks to outperform a benchmark or reduce portfolio risk, or both. Smart beta funds may underperform cap-weighted benchmarks and increase portfolio risk.

Volatility: the annualized standard deviation of monthly index returns.

General Risk Information There are risks involved with investing in ETFs, including possible loss of money. Index-based ETFs are not actively managed. Investments focused in a particular industry are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. The Fund's return may not match the return of the Underlying Index.

An investor should consider the Funds' investment objectives, risks, charges and expenses carefully before investing. For this and more complete information about the Funds call 800 983 0903 or visit invescopowershares.com for a prospectus. Please read the prospectus carefully before investing.

Media Contacts: Kristin Sadlon Porter Novelli 212-601-8192 Email Contact Bill Conboy 303-415-2290 Email Contact