Smart Beta Strategies as Outcome-Oriented Solutions in the Equity Space

Abstract

As index investing continues to grow, we are witnessing an expansion of what the beta continuum encompasses. During the 2000 dot-com bubble and the 2007–2008 financial crisis, market-capitalization weighted strategies revealed some of their limitations. As a result, increasing attention is being devoted to index solutions that go beyond the traditional space—often referred to as “smart beta.”

In this article, we focus our attention on a sample of beta strategies within the equity space. By analyzing each beta’s benefits and limitations, we highlight their ultimate nature as outcome-orientated solutions. We believe the results of our analysis encourage investors to think about beta as a range of complementary tools that should be used to actively rotate portfolios from one indexed strategy to another, based on investors’ goals and on prevailing market conditions.