Yesterday wow, tomorrow pooh – Factor strategies in the European ETF market

"Smart beta” ETFs are becoming increasingly popular in Europe as well. However, similar to their US counterparts, their performance to date is at best average.

The market for so-called "smart beta" strategies has grown considerably in Europe in recent years. Since 2012, the investment volume of ETFs domiciled in Europe has grown at double-digit rates each year. While assets under management (AUM) amounted to just EUR 5 billion in 2012, as much as EUR 38 billion have already been invested in factor ETFs by the end of the first half of 2018.

In keeping with the ETF industry's promise to generate outperformance over the broad market, it should be possible to achieve above-average returns with every "smart" approach in almost every market phase. However, our study shows that none of the strategies are capable of proving superior results over the entire period under investigation.

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