Smart Beta

The new way to harness the drivers of return

 

iShares Edge Smart Beta ETFs provide a new and low-cost way to strengthen portfolios by targeting outcomes such as reducing risk or enhancing returns.

The suite consists of four minimum volatility and multifactor funds that provide investors efficient access to factors; a simple way to capture many of the time-tested drivers of return present in actively managed portfolios. Factors are broad, persistent drivers of return across asset classes that can help explain why stocks and bonds behave the way they do.

The iShares Edge Minimum Volatility ETFs are available across Australian and global equities. They seek to deliver market-like returns with less risk. Importantly, their benchmark indices have lost less during downturns, when broad markets have suffered.1

The iShares Edge Multifactor ETFs are also available across Australian and global equities. They offer exposure to companies that have the potential to deliver above-market returns over the long term with similar risk and exposure to the broad market. The funds focus on four time-tested drivers of performance, or factors: Quality (financially healthy firms), Value (inexpensive stocks), Size (smaller companies) and Momentum (trending stocks).

Explore the range of iShares Edge Smart Beta ETFs by clicking on the different sections below.

1 Source: Refer to 10 year upside/downside capture ratios chart in the reduce risk section.

 Why investors should explore Smart Beta

Intersection Diagram

Smart Beta provides an easy and low-cost way to put factors to work in a portfolio.

Research shows that historic stock performance has been driven by five well-known style factors: Minimum Volatility (stable stocks), Quality (financially healthy firms), Value (inexpensive stocks), Size (smaller companies) and Momentum (trending stocks).2

While the concept of factors is not new, their use is being revolutionised by technology and delivered via ETFs, in a cost effective, transparent and efficient way.

2 Source: The existence of broad and persistent drivers of long-term returns, referred to as factors, is well-documented across academic literature, industry research, and index provider research. For a detailed discussion of factor investing, see Andrew Ang, Asset Management: A Systematic Approach to Factor Investing (Oxford University Press, 2014).

Seek outperformance

Smart Beta multifactor strategies help target key drivers of return while owning a portfolio with a similar profile and risk to the broad stock market.

iShares Edge Multifactor ETFs provide a cost effective way to seek outperformance by investing in either domestic or international companies that have the potential to deliver above market returns over the long term. 

The combination of the four factors that power iShares Edge Multifactor ETFs are:

Factor Diagram

Reduce risk

Smart Beta minimum volatility strategies help you stay invested in stocks while seeking to weather the market’s ups and downs.

With iShares Edge Minimum Volatility ETFs, investors have the opportunity to gain broad market exposure, but with the potential for less risk. These ETFs offer the potential for long-term growth while seeking to manage market volatility.

Upside and downside capture ratios measure the portion of broad market return captured by a given index in positive months and negative months respectively. Minimum volatility indexes have historically captured more upside than downside relative to their parent indexes. The chart below shows the portion of broad market return captured by the indexes tracked by the iShares Edge Minimum Volatility ETFs. For example, the index tracked by MVOL has captured 71% of the upside and only 52% of the downside using back-tested data over the last 10 years.

Reduce risk

Why iShares?

BlackRock is a pioneer in factor-based investing, with decades of expertise in factor research and implementation. iShares Edge Smart Beta ETFs provide an easy, transparent and low-cost way to access factors, targeting outcomes such as reducing risk or enhancing returns.

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leader

The most comprehensive range of smart beta ETFs listed on the Australian Securities Exchange (ASX).^

Expert

Over 30 years of experience and rigorous research in factor based investing and index based asset management.

Backed by BlackRock

Backed by BlackRock, trusted to manage more money than any other investment manager in the world.*

^Source: ASX, as at 14 October 2016.
*Based on US$4.890 trillion in AUM as of 30 June 2016.