Smart Beta ETFs are a type of fund that combines features of traditional passively managed ETFs with elements of active management strategies. Unlike classic ETFs, which replicate popular market indices (such as the S&P 500), Smart Beta ETFs seek to outperform the market by selecting stocks according to specific rules, known as ‘smart beta’, while keeping management costs low. Let's take a look at the best of these, which have beaten broad indices in past years.
Table of contnets:
- Invesco S&P 500 Momentum ETF
- Invesco Energy Exploration & Production ETF
- iShares Russell Top 200 Growth ETF
- First Trust RBA American Industrial Renaissance ETF
- iShares Semiconductor ETF
Invesco S&P 500 Momentum ETF
Source: Tradingview
The first is the interestingly structured Invesco S&P 500 Momentum ETF, based on a momentum strategy. The fund twice a year increases the share of stocks from the S&P 500 index that are trending upwards and decreases their share when they start to fall. This has allowed it to achieve a return of 134 per cent over five years, compared to 91 per cent for the S&P 500 index alone, while maintaining a management cost of just 0.13 per cent.
Invesco Energy Exploration & Production ETF
Source: Tradingview
The other fund beating the broad market, with a 146 per cent return over the past five years, is the Invesco Energy Exploration & Production ETF. It focuses on investing in companies in the US energy sector, mainly those involved in the exploration, production and processing of energy commodities such as oil and natural gas. This fund has continued to increase in value despite the fact that the price of oil has risen by 43 per cent over these five years.
iShares Russell Top 200 Growth ETF
Source: Tradingview
A third fund that regularly outperforms the broad market is the iShares Russell Top 200 Growth ETF, which has delivered a total return of 157 per cent over the past five years. The fund invests in shares of US companies with large market capitalisations that stand out for their above-average earnings growth forecast potential over the coming years.
First Trust RBA American Industrial Renaissance ETF
Source: Tradingview
Another more concentrated fund that has outperformed the major indices over the years is the First Trust RBA American Industrial Renaissance ETF, with a return of 182 per cent over the past five years. The fund invests in shares of companies in the US industrial sector, covering manufacturing, construction, transportation, industrial technology and industrial services.
The success of this fund can be attributed to the fact that all companies included in the index must have a positive analyst consensus earnings forecast. Otherwise, they are excluded. This allows the index to naturally and quickly purge itself of less promising assets. An additional advantage of the fund is that the companies held appear to be relatively cheap, with a price-to-earnings (P/E) ratio of 18.7, compared to 29 for the S&P 500 index.
iShares Semiconductor ETF
Source: Tradingview
An impressive return of more than 200 per cent over the past five years has been achieved by the iShares Semiconductor ETF. This fund offers exposure to semiconductor companies. The dynamic growth in this case can be attributed to the developing artificial intelligence technology, which relies heavily on semiconductors, graphics cards and processors.
However, it is worth bearing in mind that this fund is focused on a single sector, which means that it does not benefit from sector diversification. As a result, it is 60 per cent more volatile than the broad market. However, the dynamic development of artificial intelligence technology and the investments announced by major technology giants in data centres and AI development may continue to support the earnings growth of semiconductor companies.
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
The above trade publication does not constitute an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No. 596/2014 of April 16, 2014. It has been prepared for informational purposes and should not form the basis for investment decisions. Neither the author of the publication nor Conotoxia Ltd. shall be liable for investment decisions made on the basis of the information contained herein. Copying or reproducing this publication without written permission from Conotoxia Ltd. is prohibited. Past performance is not a reliable indicator of future results.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79,03% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
