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Tuesday, February 23, 2016

Maybe Smart Beta Funds Are Not So Smart?

News summary by MFWire's editors

Everywhere you turn, fundsters from firms of all shapes and sizes are catching smart beta fever. Now one of smart beta's proponents is shouting "you've gone too far!"

Rob Arnott
Research Affiliates
Chairman, Chief Executive Officer
Last week Research Affiliates chief Rob Arnott (along with RA's Noah Beck, Vitali Kalesnik, and John West) issued an ominously titled report, "How Can 'Smart Beta' Go Horribly Wrong?" Arnott and his team predict, among other things, "the reasonable probability of a smart beta crash as a consequence of the soaring popularity of factor-tilt strategies" and worry that smart beta providers are "at risk of encouraging performance chasing, under the rubric of smart beta." (Meanwhile, Morningstar is instead labeling such strategies as "strategic beta", eschewing any label regarding the strategies' smarts or lack thereof.)

"If so, then smart beta is, well, not very smart," the RA folks write.

Attracta Mooney of the Financial Times reported on Arnott's worries.

The RA report is labeled as the first of a series on smart beta. 

Edited by: Neil Anderson, Managing Editor


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