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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.

16/06/2015

Stephen Kwa

Senior Client Portfolio Manager, QEP

Schroders

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.

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. 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 Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

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