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Alternative Weighted Index ETFs Attract Heavy Inflows: Schwab


Investors continued to jump into exchange traded funds for access to the various market segments, notably alternative weighted funds, Schwab says.

According to a Charles Schwab note, ETF assets custodied at Schwab increased 23% year-over-year, slightly higher than industry growth.

Among the various ETF products available, alternative weighted ETFs accounted for a robust 29% of inflows over the past year, attracting 39% of retail trader flows, 31% of RIA clients and 25% of retail investors. Retail traders account for those on the “Schwab Active Trading” platform.

Alternative weighted ETFs include index-based funds that do not follow the traditional market capitalization weighted methodology.

In the second quarter, alternative weighted ETFs brought in 48% of inflows year-over-year.

For instance, dividend weighting in the second quarter saw a 35% rise in inflows year-over-year, equal-weight ETFs experienced a 19% increase and proprietary weighting increased 17%. Proprietary weighting include “enhanced” or “smart-beta” indexing methodologies that are based on active management styles. [iShares: Dividend Strategies as Rates Rise]

Additionally, investors seeking international and U.S. fixed-income ETFs mostly looked into alternative weighted ETFs. In the international equity category, ETF investors sought dividend weighted styles. U.S. fixed-income ETF investors leaned toward proprietary weightings, which mostly consisted of ultra short duration bond ETFs. [Floating Money Market NAV Makes Short-Duration ETFs Attractive]

For more information on ETF asset flows, visit our ETF performance reports category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.