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Fund Times

Active Management 2.0

The popularity of strategic-beta strategies risks dooming these funds to underperformance.

This analyst blog is part of our coverage of the 2016 Morningstar Investment Conference. 

Traditional active managers have found conventional market-cap weighted benchmarks like the S&P 500 Index formidable foes. A new wave of so-called "strategic-beta" or "smart-beta" strategies promise better outcomes. These funds track rules-based indexes that overweight stocks based on investment factors such as valuation, size, momentum, profitability, and volatility, which academic research has tied to superior risk-adjusted returns. Whether these market inefficiencies will persist--and whether investor can take advantage of them--were the central questions considered at a Morningstar Investment Conference panel on strategic beta.