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.
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 named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This document is intended to be for information purposes only and it 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. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy. The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall. Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors. Issued by Schroder Unit Trusts Limited, 31 Gresham Street, London, EC2V 7QA. Registered Number 4191730 England. Authorised and regulated by the Financial Conduct Authority.