Smart Beta ETFs Poised for Growth Among Institutional Asset Managers

Independent Research Reveals Increased Institutional Interest in Non-Market Cap Weighted ETFs

CHICAGO, IL--(Marketwired - Dec 11, 2013) - Institutional investors report they are increasingly using smart beta Exchange Traded Funds (ETFs), according to a new study conducted by Cogent Research, a division of Market Strategies International. The results reveal that more than half (53%) of institutional decision makers will increase their use of smart beta ETFs over the next three years -- higher than any other ETF category, including market-cap weighted ETFs (48%).

"These results echo what we are hearing from our clients and confirms what we have seen with industry-wide flows: non-market cap weighted ETFs have captured 25% of the equity ETF inflows year to date, despite representing only 12% of the assets," said John Hoffman, Invesco PowerShares director of ETF institutional sales and capital markets. "Furthermore, the research results show that interest in the smart beta category is being driven by a desire to improve risk-adjusted returns, reduce volatility and gain access to more sophisticated weighting methodologies."

According to the study, larger institutions (those managing in excess of $500 million in assets) are twice as likely to agree that smart beta ETFs provide better risk-adjusted returns relative to market cap weighted ETFs -- highlighting the focus on managing risk in today's market.

"We are seeing an increasing amount of interest and usage of non-market cap weighted solutions among institutions," said Dan Draper, Invesco PowerShares managing director of global ETFs. "The study results reveal that more than half of institutional decision makers agree that smart beta ETFs can be used to manage portfolio volatility."

Survey respondents identified a number of ETF providers that offer smart beta products, however, nearly three-quarters (72%) of current smart beta users indicate PowerShares offers truly innovative ETFs. Another 62% believe Invesco PowerShares offers a breadth and depth of ETF offerings, and is a product and service innovator in the category.

"We've been working diligently to educate investors and to build awareness for our smart beta offerings. We believe our broad range of solutions can be used to meet the current and future challenges of institutional asset managers," Draper added. "We're proud that the vast majority of smart beta users consider us a leader in the category and we are committed to providing thought leadership for investors on this front."

Full research results will be released in the first quarter of 2014.

About The Study
The data contained within this analysis was collected from 193 participants between September 5 and October 2, 2013. A 15-minute online survey was administered by Cogent Research, a division of Market Strategies International, to institutional decision makers, including pensions, endowments/foundations, non-profit institutions, mutual funds, as well RIAs who manage institutional assets. All institutions had at least $20 million in assets and allocated at least 1% of their assets to ETFs. Institutional RIAs had at least $25 million in assets under management -- a portion of which was managed on behalf of institutional investors.

Invesco PowerShares is not affiliated with Cogent Research, a division of Market Strategies International. Cogent Research is an independent full-service market research and consulting firm, specializing in wealth management. Cogent Research was hired by Invesco PowerShares to conduct the research used in the creation of this study. Respondents were not made aware of Invesco PowerShares' involvement in this research initiative.

About Invesco PowerShares Capital Management LLC and Invesco, Ltd.
Invesco PowerShares Capital Management LLC is leading the Intelligent ETF Revolution® through its family of more than 140 domestic and international exchange-traded funds, which seek to outperform traditional benchmark indexes while providing advisors and investors access to an innovative array of focused investment opportunities. With franchise assets over $87 billion as of September 30, 2013, PowerShares ETFs trade on both US stock exchanges. For more information, please visit us at or follow us on Twitter @PowerShares.

Invesco Ltd. is a leading independent global investment management firm, dedicated to helping investors worldwide achieve their financial objectives. By delivering the combined power of our distinctive investment management capabilities, Invesco provides a wide range of investment strategies and vehicles to our clients around the world. Operating in more than 20 countries, the firm is listed on the New York Stock Exchange under the symbol IVZ. Additional information is available at

Glossary & Terms
is a measure of risk representing how a security is expected to respond to general market movements. For example, a beta of one means that the security is expected to move with the market. A beta of less than one means the security is expected to be less volatile than the overall market. Betas greater than one are expected to exhibit more volatility or movement than the general market.

Market-Cap-Weighted: A type of index in which individual components are weighted according to market capitalization. Index value can be calculated by adding the market capitalizations of each index component and dividing that sum by the number of securities in the index.

Smart Beta: An alternative and selection index based methodology that seeks to outperform a benchmark or reduce portfolio risk, or both. Smart beta funds may underperform cap-weighted benchmarks and increase portfolio risk.

Volatility: the annualized standard deviation of monthly index returns.

General Risk Information
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