“So building strategies in a systematic fashion that avoid some of those biases or give you exposure to low volatility or the long-term factors… will give you better performance than a standard market cap weighted benchmark and better performance than an active strategy as well.”
Not everyone is convinced, though, and passive provider Vanguard is careful to avoid the term smart beta. Neil Cowell, head of UK retail sales at Vanguard, remarks: “Smart beta can be a misleading title in that it can suggest an investment might get all the benefits of beta, with some additional benefit on top. We call it rules-based active, and if you are making a decision away from market cap weighting, just be very clear about why you’re doing it and what you expect to get.”
Ellie Duncan is deputy features editor at Investment Adviser
