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Sitting between active and index strategies, smart beta represents an evolution in index investing and an opportunity for investors. Rather than simply weighting stocks by market cap, these indices are constructed to identify and exploit specific factors.
Investors can capture these exposures by utilizing the SPDR range of Smart Beta ETFs, which has funds offering exposure to the value, volatility and quality dividend factors.
Smart Beta ETFs can help investors achieve targeted outcomes through factor-based investing.
Factor investing seeks to systematically identify and exploit specific drivers of risk and return, aiming to deliver a premium above the traditional market-cap benchmarks.
ETFs can be used to track a specific factor index to deliver diversified, transparent and cost-efficient3 access to smart beta.
Take Shelter When Faced With Volatility
In uncertain times, it may be a good idea to adopt a defensive posture while staying fully invested in the equity markets. This can be achieved through a low volatility strategy.
The SPDR low volatility ETFs track indices that are weighted according to the volatility of the underlying stocks rather than their market capitalisation, which provides a measure of protection against market downturns.
We believe these ETFs could generate higher returns than cap-weighted strategies over the long term, exploiting the so-called 'low volatility anomaly'.
Moreover, a low volatility strategy may be particularly suited to those investors who are not required to adhere to any particular benchmarks and who wish to take cover from heightened market volatility.
Vipul Faujdar, SPDR ETFs – UK Wealth explains how low volatility strategies can offer upside participation while introducing defensiveness into portfolios.
Value Investing for the Long Term
Academic evidence has shown the outperformance of companies with lower valuations over the long run on a risk-adjusted basis, as documented by studies such as Fama-French.4
The SPDR range of value ETFs is based on indices that emphasise metrics such as sales, book value and earnings to provide a comprehensive measure of value.
Investors looking for specific exposure to value companies can select from US and Europe. Additionally, SPDR offers ETFs that emphasise both value and smaller-sized companies to suit those investors with specific allocation preferences.
Companies that consistently pay higher dividends often possess sound fundamentals, such as lower debt and stable earnings. When seeking dividend yield, these are important characteristics, as they can insulate a company from a sudden market downturn.
The SPDR Dividend Aristocrats ETFs are weighted according to the highest yielding dividend stocks, with a filter to emphasise those companies that have sustained or increased dividends over time.
1 Source: Morningstar, as of 30 April 2019. 2 Source: FactSet, as of 30 April 2019. 3 Frequent adding of ETFs could significantly increase commissions and other costs such that they may offset any savings from low fees or costs. 4 Source: Journal of Financial Economics 33 (1993), Common risk factors in the returns on stocks and bonds by Eugene Fama and Kenneth French.
SPDR ETF is the exchange traded funds ("ETF") platform of State Street Global Advisors and is comprised of funds that have been authorised by European regulatory authorities as open-ended UCITS investment companies. SPDR ETFs may not be available or suitable for you.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns.
Changes in exchange rates may have an adverse effect on the value, price or income of an investment. Further, there is no guarantee an ETF will achieve its investment objective.
SHARES IN THE FUNDS OF THE SPDR® ETF SICAV, SSGA SPDR ETFS EUROPE I AND SSGA SPDR ETFS EUROPE II PLC MAY NOT BE AVAILABLE FOR OR SUITABLE FOR YOU. THE VIEWS EXPRESSED IN THIS SITE DO NOT CONSTITUTE INVESTMENT ADVICE. INDEPENDENT ADVICE SHOULD BE SOUGHT IN CASES OF DOUBT. NEITHER THE INFORMATION NOR ANY OPINION CONTAINED ON THIS SITE CONSTITUTES A SOLICITATION OR OFFER TO BUY OR SELL SHARES OF THE FUNDS OR ANY OTHER FINANCIAL INSTRUMENT.
Standard & Poor's®, S&P® and SPDR® are registered trademarks of Standard & Poor's Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation's financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index.
SPDR ETFs may be offered and sold only in those jurisdictions where authorised, in compliance with applicable regulations.
Information related to Mexico
This information does not constitute and is not intended to constitute marketing or an offer of securities and accordingly should not be construed as such. The Funds referenced herein have not been, and will not be, registered under the Mexican Securities Market Law (Ley del Mercado de Valores) and may not be publicly offered or sold in the United Mexican States. Disclosure documentation related to any of the aforementioned Funds may not be distributed publicly in Mexico and shares of the Funds may not be traded in Mexico.
You should obtain the Prospectus and Key Investor Information Document (KIID) relating to specific SPDR ETFs and read them carefully prior to investing. For further information and the Prospectus/KIID describing the characteristics, costs and risks of SPDR ETFs, download a Prospectus or KIID here, talk to your financial advisor, or obtain it from your local SSGA office.