Beverly Chandler, Opalesque London:
New research from Towers Watson looks at smart beta strategies across a
range of traditional and alternative asset classes. The firm writes that it has been working
with the investment industry to move smart beta
beyond theory to implementation.
"For something 'smart’, we believe it is really
quite simple" they write. Smart beta gives the investor the
opportunity to capture a:
Smart beta strategies may have one or more of
the following features:
- Wider spread of risk premia than conventional
- Risk premium previously only available through
expensive active strategies in a cheaper way.
- Captures existing (or alternative) risk premia
(some of which might have been 'hidden’ in
- Improves portfolio diversity.
- Captures long-term investment themes that some
other investors are not well placed to exploit.
- Improves implementation versus
Towers Watson believes that smart beta strategies should be
simple, low cost, transparent and systematic.
"To believe in the smart beta proposition, one
must first accept that there is a wider framework
than the narrow definitions of alpha and beta
that classic finance theory puts forward. In this
framework, somewhere between alpha and beta,
lies smart bet......................
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