http://www.bloomberg.com/news/articles/2015-03-16/smart-beta-etfs-attract-billions-with-critics-blaming-dumb-money"The craze is driving traditional indexers nuts. “Don’t mention smart beta in this office!’’ Jack Bogle, 85, founder of Vanguard Group and father of the index fund, tells Bloomberg Markets. “I don’t even know what it means. Baloney. Marketing!’’
"Rick Ferri, founder of Portfolio Solutions in Troy, Michigan, says smart beta is a ploy for active managers to retake some of the billions lost to Bogle and his low-cost indexes. If an active manager has an investment strategy that shows positive returns over the past decade or so, and it can be encoded in an algorithm, he can call himself an indexer, charge higher fees for his secret sauce, and kick back and get rich, Ferri says. “Everything that used to be active management became fundamental indexing,’’ he says."
"Like any Wall Street bonanza, this one has drawn imitators, innovators, and possibly a few hucksters, according to the U.S. Financial Industry Regulatory Authority, which included smart beta on a list of eight product categories that it plans to scrutinize for sales violations this year."
IMO, given that some smart beta ETFs have outperformed market indexes, and some have lagged, it is essential to determine WHY before investing. Whenever I have looked, it is often---but not always---because the "outperformers" have cherry-picked their interval. And how would your robot have done in 2009, Rob Arnott, if Congress hadn't swooped in with a $900B bailout after your model told it to buy BofA and Citigroup? I suppose it "knew" that was coming, ahead of time.
But FINRA is looking into it, presumably the same way that the SEC is looking into the October 15th bond market fiasco (still waiting on that one), so no need to worry.
