Smart Beta Strategy Selection – Pick The Right One! – ValueWalk Premium
Smart Beta Selection

Smart Beta Strategy Selection – Pick The Right One!

Shifting your smart beta strategy selection focus to craftsmanship and cost. Learn what questions to ask and how to make better-informed decisions when investing in smart beta.

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Q2 hedge fund letters, conference, scoops etc

Smart Beta Strategy Selection - Pick The Right One!

The Proliferation of Smart Beta Index Strategies

smart beta strategy selection

Has Led to ETF Product Proliferation

Smart Beta Selection

What to Do!?

  • DO NOT chase performance
    • We’ve all gotten burned before…
  • DO choose robust Smart Beta strategies
    • There are only a few!
  • DO focus on product craftsmanship
    • Reliably impactful to investment return!

Trend Chasing Is Costly

Smart Beta Selection

Most Product Providers Are Trend Chasers!

Smart Beta Selection

Cumulative Excess Return Before/After Index Launch

Smart Beta Selection

How do we know which Smart Beta strategies are robust?

  • Those based on factors that have been vetted, replicated, and debated in top academic journals over decades.
  • The strategy works across geographic regions.
  • The strategy offers a robust premium across minor variations in the signal definition/construction.
  • Trading costs do not erode the return premium offered by the corresponding factor.

Not All Popular Factor Strategies Are Robust

Smart Beta Selection

Valuations Are Predictive of Future Returns

Smart Beta Selection

Implicit Cost of Indexing Strategies

Smart Beta Selection

See the full slides here by Research Affiliates

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