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A popular, low-risk investment product is losing its luster as new launches slow down

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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, says Morningstar analyst Ben Johnson.

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.

Strategic beta vehicles, also called smart beta, are exchanged-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 , which is made up of stocks that typically have very low volatility like Coca-Cola. The fund also owns shares of Aon, a professional services company.

However, market share has stabilized since 2015 while the number of new launches dropped to 59 in 2018 from 85 the year before. "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.

 

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