In Focus

Charting the Journey in Smart Beta

Historical factor returns—net of changes in valuation levels—are much lower than recent performance suggests. In fact, many of the most popular new factors (some 458 at last count) have succeeded solely because they have become more expensive. This trend matters to investors because rising valuation levels inflate past performance, reduce potential future performance, and amplify the risk of mean reversion to historical valuations.

Timing “Smart Beta” Strategies? Of Course! Buy Low, Sell High!

By Rob Arnott Noah Beck Vitali Kalesnik

September 2016 | Read Time: 45-60 mins.

Contrarian timing can improve performance. Most investors, however, engage in timing by chasing past performance. Such trend chasing erodes the benefits of factor investing even when diversifying across different factors if they all have recent strong results.

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