The challenges facing investment advisors seem to get more complex every day: volatile markets; an uncertain political environment; and an unending array of new investment approaches to understand. In the past, it seemed there were two "schools of thought": 1) since markets are efficient, use low-cost, cap-weighted passive; or 2) find managers to beat the market and manage risk. Today we see an incredible proliferation of choices in "the space between" passive and active strategies.

Within the growing universe of noncap-weighted ETFs—alternatively called smart beta, or factor-based investing—there are strategies targeting single-risk factor exposure (e.g., value, momentum), others employing alternative weighting methods (e.g., fundamental-weighted, dividend-weighted) and a smaller, but expanding, set of multifactor strategies coming to market.