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Rating:When Beta Starts to Smell Like Alpha Not Rated 0.0 Email Routing List Email & Route  Print Print
Thursday, March 06, 2014

When Beta Starts to Smell Like Alpha

News summary by MFWire's editors

Alright, so some of these smart-beta products are getting gold stars.

A recent Bloomberg article noted the success of ETFs with new fangled indices like the WisdomTree Japan Hedged Equity Fund (DXJ) and the Guggenheim S&P 500 Equal Weight ETF (RSP), which have generated mind-blowing returns and, likewise, have seen a flood of new money.

An ETF article also noted the trend highlighted by Bloomberg and drilled down a little more into what this could mean for investors.

To summarize quickly, many of these new products are looking at all sorts of new strategies for weighting stocks in indices, taking into account sales, dividends, and other fundamentals or "factors."

However, both stories warn investors that unless they gain a thorough understanding of these products, they could suffer some wicked losses.

A fair enough point, which can be applied to many investing trends now, be it alts, or emerging markets, and so on.

It's getting mighty hard to be an informed investor nowadays, with so much newfangled stuff to learn.

But, assume enough investors, or more likely their investors, start to understand this rocket science, and figure out how to use these ETFs, and when not to use them. (Remember, more people are getting the crazy idea that your active funds can be replaced by ETFs.)

When that day comes, active managers are going to have to dance even harder to get their attention. 

Edited by: Tommy Fernandez


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