Should risk controlled equity be seen as a smart beta?


According to the Financial Times lexicon, “Smart beta strategies attempt to deliver a better risk and return trade off  than traditional market cap weighted indices.” In this paper we take the evaluation criteria used by Ashley Lester and Fred Dopfel in their paper Improving investment outcomes with advanced beta: moving beyond elementary smart beta and explore whether risk controlled equities meet the same objective criteria that are often applied to smart beta. Our findings suggest that these risk controlled betas may offer a new and different set of portfolio building blocks relative to existing US equity, smart beta, bond, and cash components within a portfolio.

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.