Category Archives: Smart Beta

Dividend and Low Volatility-Investments

It’s been a tough start to the new year for the S&P 500®, with a 6.4% decline (as of Feb. 3, 2016).  However, the year-to-date performance of certain factor-focused smart-beta indices tied to subsets of the S&P 500 is relatively bright. The S&P 500 is a well-diversified US equity index, seeking to provide exposure to Read more […]

Volatility Rides Again

Global equity markets stumbled out of the gate in 2016, and still haven’t found their stride. Markets are experiencing an intense case of risk off sentiment, as investors flee from riskier assets in pursuit of safe havens. The yield of 10 year US Treasury Notes is down to less than 1.8%, while oft-maligned gold is Read more […]

Credit Spread and Low Volatility Factors

Factor Definition The fixed income investment community has long used volatility in analyzing bond valuations and identifying investment opportunities.  We have defined volatility as the standard deviation of bond yield changes for the trailing six-month period.  All else being equal, the more volatile the bond yield is, the higher the yield needs to be in Read more […]

Is There Merit in Blending Factors in Smart Beta Strategies?

Despite the fact that many single-factor strategies have empirically delivered positive excess returns in the long run, they have suffered periods of substantial underperformance under certain market conditions due to their cyclicality.  Blending a number of desired factors with low correlations is a potential way to attain more balanced and diversified portfolios.  The obvious questions Read more […]

Factor-Based Investing in US IG Corporate Bonds: Volatility and Credit Spread

Factor-based investing in equities is a well-established concept supported by over four decades of research. However, factor-based investing in fixed income remains in its nascent stages. Our analysis has found that factor-based fixed income strategies implemented in a rules-based, transparent index can represent an alternative tool for fixed income portfolio construction. In the next few Read more […]

A Better Mousetrap: Smart Beta Offers Superior “Risk-On/Risk-Off” Relative-Strength Signals

Technicians frequently compare the performance of the S&P Consumer Discretionary sector with the Consumer Staples sector for guidance on the market’s “risk-on” or “risk-off” trend. When the more cyclical Consumer Discretionary sector, which contains such sub-industries as autos, homebuilding and retail, outperforms the more defensive Consumer Staples group, which includes food, beverage and tobacco firms, Read more […]

Performance of Smart Beta Strategies Across Market and Economic Cycles

Historically, factor-based strategies have generated significant risk-adjusted returns in the long run, but they can also exhibit a high amount of cyclicality in the short run.  Based on our studies of factor performance under different financial regimes—the market cycle, the business cycle, and the investor sentiment regime—we found that factor strategies historically have been most Read more […]

Valuing Low Volatility: Does Timing Matter?

If early January is any indication, 2016 should be another year when low volatility strategies will be in vogue. Popularized in the turmoil following the financial crisis in 2008, low volatility strategies, as the name denotes, serve well in times of equity upheaval. And despite bearing lower risk low volatility strategies have outperformed their benchmarks Read more […]

Understanding the Risk and Return Drivers of Smart Beta Strategies

Within the passive investment arena, smart beta strategies have witnessed a substantial growth in assets, and there is now a swathe of such strategies in the marketplace, many of which bear similar names and share similar objectives.  One may therefore expect that all these strategies are similar and that any differences would only elicit interest Read more […]

Where Can Smart Beta Take You? Our FA Forum Is Coming to an Internet Near You

I am excited about our Miami Financial Advisor Forum, “Where Can Smart Beta Take You?”  This educational event will occur at the Epic Hotel in Miami on Feb. 24, 2016.  For the first time, we will livestream this financial advisor forum.  We hope that by broadening access to this event, more of you will find Read more […]