Fundhouse's Maguire: Could smart-beta really replace active management?

Cause and effect not so clear

As computers grow ever more powerful, the rise of smart-beta strategies may seem inevitable but there are some very human reasons to think it might not be, argues Rory Maguire, managing director of Fundhouse.

Over the past year, we have found ourselves increasingly being asked whether smart-beta could replace traditional active management and so drive down investment fees. Computer-generated portfolios, the argument goes, could create strong alternatives to managers with a proven and predictable stylistic bias, such as Fundsmith or the Schroder Recovery team. The availability of ‘quality' and ‘deep-value' smart-beta products would suggest their providers certainly think this is a possibility. Another strong argument is that we live in a world where there is so much data for humans to proce...