(Video) Why Factor Tilts Are Not Smart “Smart Beta”
Rob Arnott, Mark Clements, Vitali Kalesnik
We challenge the common view that “smart beta” strategies and factor tilts are the same. In fact, factor-replicated portfolios are poor substitutes for their smart beta counterparts. Performance is poor, turnover is high, and capacity is terrible. Why? Implementation details matter—both for performance and for trading costs.