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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

Stephen Kwa

Senior Client Portfolio Manager, QEP

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:

  1. Smart beta strategies require as much due diligence as active fund management.
  2. Smart beta strategies can result in exposures that are quite different from the market in terms of stock, sector and regional concentration.
  3. 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.

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