The EDHEC Risk Institute has released a piece of research on the most common misconceptions in smart beta investing, including performance drivers, investability hurdles and strategy design choices, which could pose risks for investors.
The paper, co-authored by Noël Amenc, Frédéric Ducoulombier, Felix Goltz and Jakub Ulahel, was published with the objective to "shed light on the underlying issues" in smart beta strategies, which have been steadily gaining popularity among investors. 1. The hiding game: 'Smart beta generates alpha' Some industry figures argue smart beta is a way of generating alpha, but the researchers at EDHEC say a distinction must be made between returns based on systematic portfolio construction, and those coming from manager skill. They explain returns in smart beta come from exposure to addit...
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