Smart beta is becoming far more mainstream, but investors and advisers need to understand the origins, performance metrics and due diligence, Byron Lake has said.
The head of Invesco PowerShares in EMEA said it was important to help inform and educate investors about the use of smart beta.
He said: “Smart beta is becoming an increasingly popular component in investors’ portfolios.”
His comments came after Invesco Powershares linked up with Cass Business School to produce a series of four short papers aimed to help educate and inform advisers and their clients.
The first looks at the origins of smart beta. The second examines the performance of some relatively well-known, commercially available smart beta investment strategies.
The third paper explores nine smart beta US equity strategies, and asks whether combinations of them could generate a more attractive risk/return profile for investors than could be achieved by investing in a market cap-weighted US equity portfolio.
The fourth paper considers the challenges of investing in individual smart beta funds or ETFs, or portfolios of these investment vehicles.
Adviser view
Lloyd Davies, financial adviser for Scotland-based Central Investment, said: “Getting the best out of investments means balancing a number of key factors: risks and rewards, spread of asset allocation, your personal preferences, previous investment experience and attitude to risk.
“We believe it is important not to be drawn to one specific strategy. Instead, have a specific purpose in mind and choose from among those that will act to fulfil it. Over time, investors learn what works best and what doesn’t – and that’s a smart way to stay ahead of the game.”
