![]() The result is multifactor smart-beta strategies.ĭina Ting, Vice President, senior portfolio manager of the global ETFs group, says the multifactor market is still at an early stage, but notes her firm’s offering will have a “diversification benefit.”Ī concern among academics and investors is that as these multifactor strategies become widespread - sold on promises of safer returns or higher returns, or safer, cheaper, and higher returns - their buyers will forge ahead without understanding how fund firms cooked up the recipe, or how to find out. Conscious of losing their turf, providers have broadly embraced the Breaking Bad approach and are focusing on the product. There are more dealers on the street and their market share is being challenged.įund managers know a price war is brewing. Fund managers will happily still sell your favorite fix, and something more exotic to try out too. According to FTSE Russell’s 2017 survey on the topic, nearly half of asset owners reported some kind of smart-beta allocation, with value and low volatility the most common single-factor strategies.įor the addicts and enthusiasts out there, this is comforting news. ![]() Understanding of the underlying principles of individual factors is now at a level where most asset owners seem sufficiently comfortable to deploy at least some of their cash into factor-based investments. The product has since rebranded as BUZZ US Sentiment Leaders ETF and now manages a total of $8.9 million. In April 2016, Sprott Asset Management and ALPS Advisors launched the BUZZ Social Media Insights ETF, which “seeks to identify ‘social momentum,’ a factor that we believe serves as a leading indicator to future price momentum,” the index’s creator said at the time. Social sentiment, for example, could foretell company or sector performance from social media mentions, and whether these mentions were in a positive or negative context. Cynically, firms realized they needed to differentiate their momentum ETF from 50 others that had sprung up, so they blended a cocktail or mined some data, and stamped the new version “proprietary.” Optimistically, the surge in interest spurred factor research and development, and thus the discovery (versus invention) of persistent return anomalies. The product explosion begat a factor explosion. But now everyone has their own brand of factor in a bottle. Harris’s firm built out its risk factor expertise and a product suite relatively early, and reaped in assets while other establishment giants played catch-up. Or someone seeking exposure to companies that look cheap relative to their forthcoming earnings, sales, or competitors - but averse to paying an active stock picker - might buy a value strategy. Investors who want to ride stocks with positive earnings adjustments or good share-price growth can opt for products channeling the momentum factor. “Over the past few years, investors have reacquainted themselves with the idea of factors,” says Ana Harris, State Street Global Advisors’ EMEA head of equity portfolio strategists. The cheap highs promised by multifactor smart-beta strategies appeal to many, but how to assess the ingredients or the cooking methodology? Institutional investors are facing a similar dilemma. Even if you find a drug dealer who delivers discreetly, on time, and at the right price, can you really be sure of the quality?Īs most drugs don’t come with a convenient list of ingredients, let’s face it: With the exception of pharmacy grads and chemists, who among us would really know what’s in the stuff? So one is faced with a choice: Trust the dealer or, in the immortal words of Nancy Reagan, “just say no.” Sure, you could have the best night of your life. Getting loaded on drugs is fraught with dangers.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |