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Alternative Market Briefing

Towers Watson claims smart beta reduces equity dependence

Wednesday, March 27, 2013

Beverly Chandler, Opalesque London: The latest issue of Towers Watson’s annual Global Investment Matters publication contains an article claiming that smart beta is an ideal way for investors to access the best aspects of market diversity at modest cost and governance.

The company suggests that diversity through smart beta can help to manage risk, while implementation of the ideas behind it allows investors to exploit competitive advantages. In addition, it asserts that many institutional investors will have to hold risky assets for longer than expected in order to generate required returns and that smart beta would be a good way to reduce dependency on equities while doing this.

Phil Tindall, senior investment consultant at Towers Watson, said: "Investors know they need to make their assets work harder but some are probably unwilling players in the risk-taking business, especially if it is for significantly longer than they had planned. However, the alternatives are similarly unattractive: safe assets now very expensive due to excess demand and financial repression. While being in the risk business for the long haul may be the unfortunate reality of current investment life, the arguments for risk mitigation with diversity through smart beta provides some hope; perhaps more so over the longer than the shorter term." ......................

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