21 May 2014
The X Factor
Smart beta is evolving and multi-factor investment strategies are the next step in the process.
The Financial Times has recently adopted a sceptical stance on smart beta. “Is Smart Beta Just Old Wine in New Bottles?”, the FT asked earlier this year. While four in 10 institutional investors use smart beta strategies and a further quarter plan to do so, the FT article noted, the rationale for doing so is open to question. At least one fund manager interviewed was highly doubtful about smart beta, arguing that it is just another active strategy and so exposed to all the normal risks of active investing.
Does the Pink’un have a point? Well, let’s examine what smart beta is supposed to achieve and how it attempts to achieve its goals.