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Darkest Quant Fears Ring True in $1T World of Smart Beta
- PaulHoule 6y ago2020 would be painful for Smart Beta. A few big stocks (e.g. AMZN, AAPL) represent a large faction of stock market performance and have done well compared to the average stock in recent years and particularly the last six months. "Smart Beta" will almost certainly be underweighted those stocks, so they would have 'gotten killed' compared to index funds.
- perl4ever 6y agoHmm, if smart beta is a trend, and it's losing money, doesn't that mean it's improving everyone else's returns? Also, when the article says "The median fund has lost about 1.5% on a total return basis, compared with a more than 10% gain for the Vanguard Total Stock Market ETF." It makes me think of stuff I've read about how a low return can be much more valuable than it seems, if it is not correlated with the stock market. There is some financial engineering magic where you can actually transmute the lack of correlation into increased returns.