strategic beta also called smart beta is a form of systematic active management strategicbeta exchangetraded funds are tied to indexes that make active bets of various shapes degrees and magnitudes against broad marketcapweighted indexes that serve as their starting points these wagers are embedded in the funds’ index methodologies these blueprints can’t be revised though unlike discretionary active managers strategicbeta strategies can’t reroute once they’re off and running in september 2014 morningstar introduced its naming convention and taxonomy for the fastgrowing universe of strategicbeta exchangetraded products or etps our latest report a global guide to strategicbeta exchangetraded products provides a comprehensive update on the state of the global strategicbeta etp landscape it’s framed with our latest strategicbeta and index attributes which were launched in morningstar’s database in late 2018 and routinely refreshed since then global strategicbeta etps have settled into their niche after a flurry of new products debuted in the 2010s etp providers have curbed strategicbeta product launches over the past couple of years the number of listed strategicbeta etps grew 18 worldwide in 2022 primarily owing to growth in the younger asiapacific regional market in the united states the number of closures 45 outstripped launches 22 in 2022 a testament to the market’s saturation new product ranges like actively managed etfs covered call strategies and defined outcome funds have displaced strategic beta from the limelight yet the strategicbeta etp treasure chest has deepened even as it has refined investors poured 1612 billion into the funds in 2022 translating into an organic growth rate of 98 annual net flows set a record for the second straight year the shape and trajectory of the global strategicbeta market looks different from it did a few years ago but these etps proved their firm footing in 2022 the us hosts the largest and most diverse stable of strategicbeta etps this comes as little surprise given the size and maturity of the us financial services industry the us market accounts for 44 of the total number of strategicbeta etps which compose 89 of global assets after a record 148 billion net inflow in 2022 us strategicbeta etps held about 136 trillion the roster has dwindled though the us market listed 615 strategicbeta etps at the end of 2022—a 10 net reduction since the count peaked in 2019 three fourths of us strategicbeta etp assets are invested across three groups dividend value and growth as they did in the global marketplace dividend etps ruled the roost in the us in 2022 the nearly 70 billion these strategies hauled in grew their us strategicbeta etp market share to 27 and catapulted them to the largest strategicbeta group after entering the year behind value and growth there was no such shakeup atop the list of top strategicbeta etp providers ishares and vanguard account for just 15 of the total number of strategicbeta etps but have amassed nearly 64 of the total assets invesco occupied the third spot a post it solidified after acquiring the etf ranges of guggenheim and oppenheimer in the late 2010s schwab and its ascendant etf lineup were far behind thanks to a blend of lowcost nofrills strategies and fundamentally weighted funds 1 the global market for strategicbeta etps has matured as of dec 31 2022 1384 strategicbeta etps held roughly 153 trillion of assets worldwide for most of the decadeplus strategicbeta etps made inroads against their peers that are benchmarked to moretraditional indexes recently the global market has matured to be sure the strategicbeta etp market takes different shapes in different parts of the world in asiapacific for example net flows and product launches broadly increased in 2022 but in the us and europe which jointly constitute about 95 of the market strategicbeta etps’ marketshare gains have stalled product closures outnumbered launches in the us and europe in 2022 perhaps the clearest indication that a onceburgeoning market segment has reached a shakeout the number of listed strategicbeta etps slid by 31 in the us and 06 in europe last year a difficult year in the markets may have made fund providers keener to cut bait on the strategies that had yet to resonate with investors unrelenting fee competition is another sign that the space has grown up novelty and differentiation gave strategicbeta strategies more pricing leeway for years but those days have drawn to a close in the us the assetweighted average strategicbeta expense ratio was 019—only a hair pricier than conventional etps’ 016 clip and 5 basis points cheaper than the 2018 assetweighted average feeconscious investors have squeezed out most strategicbeta etps for which there are alternatives etps listed in the morningstar’s dividend strategicbeta group dominated the flowscape in 2022 these strategies gathered 85 billion of net new money globally in 2022 accounting for 52 of global net flows into all strategicbeta products in most regional markets the dividend strategicbeta grouping is the largest in terms of total assets still the dividend cohort exceeded 20 organic growth in the us europe and asiapacific markets reflecting strong investor demand in both absolute and relative terms the market backdrop in 2022 helped power dividend funds’ commercial outburst as inflationary pressure sparked a series of global interestrate hikes investors flocked to dividend etps because they tend to favor stable companies and exhibit relatively low sensitivity to interestrate changes last year’s bear market breathed life into the riskoriented strategicbeta group after pulling about 30 billion from these products as markets cruised in 202021 investors piled a fresh 96 billion into them in 2022 3 strategicbeta and sustainability are not symbiotic etps may qualify as both strategicbeta and sustainable the two descriptions aren’t mutually exclusive for example nuveen esg largecap value etf nulv targets stocks with strong esg metrics and sits within the value strategicbeta group the rise of environmental social and governance investing figured to be a new avenue for strategic beta to grow especially after sustainablefund providers already applied esg tints to conventional investment strategies so far combining sustainable and strategic beta has not emerged as a trend in europe the largest market for sustainable investing assets in sustainable strategicbeta etps accounted for 85 of the strategicbeta etp market—notably smaller than sustainable funds’ 20 share of all european fund assets as of end2022 1 products that combine the philosophies haven’t caught on in the us either the 15 us strategicbeta etps labeled as sustainable tallied only 31 billion or less than 02 of the us strategicbeta market the global strategicbeta etp market has evolved once an upstart pocket of the fund universe most of these strategies have seen their menus shrink and their market share plateau that doesn’t mean these products have fallen off the map dividend funds led a recordsetting year of inflows in 2022 and the riskoriented group saw a resurgence of its own strategicbeta etps no longer look like rising stars but they have solidified their spot in the global investment solar system