60 seconds on why smart beta's appeal is growing
Smart beta investment strategies have been growing in popularity, but what are they? Schroders portfolio manager Stephen Kwa explains.
16 June 2015
What is smart beta?
Smart beta is a new investment trend proving attractive to some investors who are seeking an alternative to traditional active management.
Smart beta strategies are effectively diversified equity portfolios that are systematically rebalanced; targeting factors that are expected to outperform in the long-run or reduce risk.
Three things to know about smart beta:
- Smart beta strategies require as much due diligence as active fund management.
- Smart beta strategies can result in exposures that are quite different from the market in terms of stock, sector and regional concentration.
- Smart beta portfolio characteristics can change drastically on rebalancing dates.
Smart beta strategies never outperform all the time; investors need to understand the exposures they are buying into as well as the risks they are taking on when investing in smart beta products.
Important Information: The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.