Smart Beta ETFs are surging in popularity because they fill the space between active and passive investing, says John Hoffman, Director of ETF Capital Markets at Invesco PowerShares. Most institutional decision makers define smart beta ETFs as non market-cap weighted funds that use rules-based, predetermined methodologies to pick stocks. Hoffman says low volatility, momentum, and buyback ETFs have been seeing the greatest inflows over the past year from both retail and institutional investors.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

More from Video

10 Seconds to Genius: Lowe's New CEO Marvin Ellison

10 Seconds to Genius: Lowe's New CEO Marvin Ellison

Replay: Jim Cramer on the Markets, Oil, General Electric, Zillow and Micron

Replay: Jim Cramer on the Markets, Oil, General Electric, Zillow and Micron

NYSE's New President: On a Mission to Attract Talent to Wall St.

NYSE's New President: On a Mission to Attract Talent to Wall St.

Pegasystems Founder Explains Why He Has One of the Hottest Tech Stocks Around

Pegasystems Founder Explains Why He Has One of the Hottest Tech Stocks Around

10 Seconds To Genius: Facebook

10 Seconds To Genius: Facebook