Why 'smart beta' is neither smart nor beta

There is considerable swirl in investment circles regarding the concept of ‘smart betas’. What is a smart beta? Is it analogous to a ‘smartphone’ – a breakthrough that is easy to use and makes life better by expanding the ability of individuals to communicate and access a wide range of information on the fly? The short answer is no. Beta, most simply, is the aggregate opportunity set for a given asset class. In reality, smart beta investors are buying a strategy that simply overweights and underweights specific factors or characteristics of a particular market. It is, therefore, an activ...