A quant's Guide to 'Smart-beta' ETFs
Well-researched risk premia explain long-term equity fund returns. These factors generally explain the outperformance of all but the very best actively-managed funds, leaving negative residual alpha in the form of fees and implementation costs.
Active fund managers’ screens and front-end processes implicitly pick up factors like Quality and Value, which are available at lower cost through ETFs with transparent rebalancing and equity selection (constitution) criteria, coupled with competitive management fees and optimized implementation costs.
We continuously scan the ‘smart-beta’ ETF universe to identify the funds with maximum expected risk-adjusted return, trading at or below their historical valuations.
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superior long-term performers, with rational economic and behavioral underpinnings.
