Smart Messaging Wins in the Smart Beta Wars
According to the Wall Street Journal, the Trump election has been “a boon for smart beta, the hottest trend in exchange-traded funds.” The financial and tech stock-rallying Trump Bump has fueled a dramatic shift from low-volatility strategies to undervalued stocks, which have “swelled to record size since the election.”1
No doubt, smart beta strategies have been wildly popular for years now. They account for almost a quarter of the value of the total U.S. ETF market, nearly $500 billion in U.S. assets. And providers have not been slow to offer new products. Last year, 67 providers launched more than 200 new strategic beta ETFs/ETPs globally. This brings the total number on Morningstar’s database from 911 to 1123. It also brings the potential for greater price sensitivity.
We are, in fact, now seeing the results of an increasingly crowded landscape, where the pressure to reduce fees is mounting. In December, Blackrock cut expenses on six smart beta ETFs by as much as 20 basis points. Hartford Funds followed, decreasing fees on four of its smart beta ETFs.
As the market becomes more and more competitive,
the importance of a consistent, well-conceived brand
strategy grows ever stronger.
Smart beta providers need smart messaging to break through the clutter, to differentiate their strategies, and to connect with investors, many of whom remain confused by the wealth of strategies and nomenclature within the smart beta world.
From the overall business level, to the fund suite level, to the individual product level, messaging must be crafted to support the objectives of your strategy, and ideally, to embrace your value proposition so that investors have confidence in the provider they are working with.
PowerShares by Invesco, for example, has branded its ETF business under the positioning line, Leading the Intelligent ETF Revolution, and using the word intelligent to distinguish itself from other smart beta providers. At the fund suite level, iShares has clearly positioned its Edge Minimum Volatility ETFs for investors seeking greater stability. And for any investor looking to access the gold bullion market, State Street Global Advisors’ product advertising is declaratively bold, offering “the most liquid gold ETF.”
As the growing AUM of smart beta strategies attests, investors are clearly receptive to the strategies’ potential benefits as they continue seeking improved returns and lower costs. They are also seeking clarity and an expert partner to help them maneuver through this often complex range of strategies. You can help them by streamlining your messaging to clearly and simply differentiate your offering. This isn’t always easy, but an expert branding agency can help you look at your products through the eyes of a potential investor, and find the space only you can own.
As competition in the smart beta market gets tighter, the need for on-point branding gets stronger. Be smart about the way you position your offerings, and you’ll win your share of this burgeoning market.
1Wall Street Journal, February 6, 2017