Experience in Overseas Markets
Taking the U.S. market as an example, the scale of Smart Beta ETFs continues to grow.

By the end of 2019, the number of Smart Beta ETF products in the U.S. market reached 900, with a total scale of $982.69 billion, a year-on-year increase of 28.2%. In 2019, 71 new Smart Beta ETF products were launched, with a total scale of $1.86 billion.

In terms of product types, the market application of equal-weight and low-volatility strategy products in newly issued equity Smart Beta ETFs in 2019 saw significant growth, accounting for 25.9% and 17.2% of the scale, respectively. Additionally, the issuance volume of multi-factor strategies rebounded to a high level, becoming the strategy with the highest number of new products in 2019.

Looking at existing products, value, growth, and dividend strategies have the largest scale, while multi-factor, fundamental, and equal-weight strategies have the highest number of products. The six largest strategies by scale are growth, value, dividend, fundamental, multi-factor, and low volatility, collectively accounting for 92% of the total scale of all equity Smart Beta ETFs.

Current Status of the Domestic Market
While developed overseas markets continue to grow, the development of domestic Smart Beta ETFs has begun.

Many fund managers have started to explore this space. However, due to a late start and low investor awareness, the domestic Smart Beta ETF market still has vast potential compared to developed overseas markets.

Against the backdrop of improving market efficiency and increasing institutionalization of investors, the scale of domestic broad-based index ETFs has grown rapidly. Smart Beta products developed based on broad-based indices have become one of the important long-term development directions and are attracting increasing attention from fund managers.

By the end of 2019, there were 23 Smart Beta ETFs in the domestic market, covering strategies such as dividend, fundamental, multi-factor, and low volatility. Products with strategies like dividend and fundamental, which are easier for investors to understand, have relatively larger scales and higher growth, with a combined scale of approximately RMB 10.07 billion, accounting for 63.5%.

Due to the high operational costs of ETF products, many fund managers currently use ordinary index funds (including LOFs) to implement Smart Beta strategies. By the end of 2019, there were 38 ordinary Smart Beta index funds (including LOFs), with a total scale of RMB 15.63 billion, forming a balanced landscape with ETFs.

In terms of strategies, index funds also cover dividend, value, and fundamental strategies. Notably, some quality and high-beta strategies have been applied. By scale, dividend and value strategies combined account for RMB 9.57 billion, or 61.3% of all Smart Beta index funds.

The scale of domestic Smart Beta products has surpassed the peak of 2014, but the overall scale remains small, and the strategies employed are relatively homogeneous.

Compared to developed overseas markets, domestic Smart Beta products are still in the early stages of development, with ample room for growth and a dynamic market landscape. There is significant potential for development in fostering market awareness and product diversity.