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Smart Beta Compass

Factor Performance and Flows

Recent performance of specific factor-driven indices that are tracked by relevant European-listed Smart Beta ETFs and the flows in both European- and US-listed Smart Beta ETF categories by their relevant factor exposure.

tempo di lettura 9 min

Factor Performance

The charts in this section show the relative performance of each index against a single cap-weighted market benchmark in three critical geographic regions: World/Global, USA, and Eurozone/Europe.

Q4 Marked a return to Growth in the USA and Value in Europe Global equities were flat in Q4, with US equities advancing and Europe contracting. Growth was the only outperforming factor in the US. Momentum performed well in European and World equity. The picture was mixed across geographic benchmarks: MSCI World (-0.2%), S&P 500® (+2.3%), EURO STOXX® (-1.9%), and MSCI Europe (-2.7%).

Value Exposure Select significantly outperformed in Europe. The MSCI Europe Value Exposure Select Index outperformed the MSCI Europe Index in Q4 due to positive stock selection in Consumer Staples (+137bps) and Financials (+77bps).1

Looking Forward The return of growth factor outperformance in Q4 served to halt expectations of sustained reversal in market leadership. Last quarter we suggested growth expectations could remain strong in developed markets, as supportive monetary conditions and moderating inflation form the basis of a soft landing. The strong macro backdrop and relatively decisive US election result may explain the lack of an uptick in volatility. In 2025, we expect US equity investors to shift focus from pre-election expectations to post-inauguration results.

In our 2025 equity market outlook Searching for Pockets of Opportunity, we suggest US large caps may remain attractive structurally while the soft landing potentially creates an opportunity for small caps. We favour opportunities in Quality Aristocrats (US and developed markets) and Size (US) because of the strong momentum behind market breadth, relative valuations, and the opportunity for US exceptionalism under the new administration.

Smart Beta ETF Flows

The figures in this section show the nominal net assets gathered by each category, across all geographic regions, over four relevant time periods. The top two and bottom two factor categories in each time period are highlighted.

ETF Flows Continued in Size and Dividend Stocks, With Low Volatility Out of Favour

European and US ETF investors took significant steps in positioning for market breadth using dividend and size factor ETFs. European investors pulled cash from value while US investors opted to sell multifactor funds.

Figure 4: European-listed Smart Beta Flows ($ Millions)

Factor Category December 2024 Last 3 Months Year to Date YTD (% of AUM)
Dividend -106 234 1,454 +4.30%
Growth -44 -191 -248  -17.41%
Low Volatility -187  -447  -2,479 -26.58%
Momentum 163  537 848  +25.57%
Multifactor 500 703 345 +5.02%
Quality -318 -314  160 +1.59%
Size 3,285 13,237 22,900 +482.59%
Value -289 -882  -2,969  -16.81%
Total 3,004  12,876 20,010 +18.81%

Source: Bloomberg Finance L.P., as of 31 December 2024. The top two (green) and bottom two (red) categories are highlighted in each time period. Flows are as of the date indicated and should not be relied upon thereafter.

Figure 5: US-listed Smart Beta Flows ($ Millions)

Factor Category December 2024 Last 3 Months Year to Date YTD (% of AUM)
Dividend 8,439  15,235 21,883  +5.56%
Growth 116 1,733 -3,062 +26.13%
Low Volatility -463  -2,248  -13,644 -23.12%
Momentum -60 4,855 7,336 +40.30%
Multifactor 115 1,396 759 +0.96%
Quality 883 1,332 14,583 +17.65%
Size 3,383 9,620 17,648 +31.29%
Value 649 1,859 15,697 +14.87%
Total 13,062 33,782 67,324 +8.35%

Source: Bloomberg Finance L.P., as of 31 December 2024. The top two (green) and bottom two (red) categories are highlighted in each time period. Flows are as of the date indicated and should not be relied upon thereafter.

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