There’s no doubt that traditional indexing is cleaning up at the expense of active managers. But that space can be crowded — with Vanguard and BlackRock dominating and little room for differentiation. So some firms like Pimco and JP Morgan are making moves to expand into the smart beta market, which gets 20% of all ETF assets, according to Morningstar.
As Pimco looks to move away from bonds, the firm is expanding its relationship with Research Affiliates, with whom they have $30 billion, by creating seven new stock-centric smart beta products. JP Morgan announced its third smart ETF, while NASDAQ OMG acquired smart beta indexer Dorsey Wright for $225 million. Meanwhile, DFA, the king of smart beta, is trying to make aggressive moves with a new asset allocation product led by Nobel Prize winner Robert Merton following the acquisition of his product, Smartnest, which struggled to gain traction in the market.
