It continues: “Smart beta strategies attempt to deliver a better risk-and-return trade-off than conventional market-cap-weighted indices by using alternative weighting schemes based on measures such as volatility or dividends.
“Smart beta refers to an investment style where the manager passively follows an index designed to take advantage of perceived systematic biases or inefficiencies in the market. It therefore costs less than active management, since there is less day-to-day decision making for the manager, but since it will, at the very least, have higher trading costs than traditional passive management (which minimises those costs), it is a pricier option.”
Trust the experts
Pity the poor manager condemned to making investment sense of that! So much simpler to concentrate on finding companies that make money, and do pay dividends. Table 1 indicates that playing asset-allocation games has no part in investment trust management. Concentrate instead on those managers who know what they are doing, and have been here before.
Mr Authers finishes his outlook for 2018 with a warning: “Asset prices do not overlap with the economy, at least in the short run. So I want to ask this question: ‘After almost a decade in which a tripling of the US stockmarket has failed to generate any excitement or even any great feeling of wellbeing, are we at last reaching a point of euphoria?’
“I suspect the answer is ‘yes’. And in the counter-intuitive world of financial markets, that might be bad news. It will certainly be challenging to navigate.”
