FYI: Back in May 2019, we penned an article looking at the challenging landscape for factor-based (aka smart beta) investing, “Factor ETFs For Diversification or ‘Diworsification?”. We received a few chuckles for that title, but factor underperformance has become no laughing matter.
Investor flows into passive funds have now exceeded those into active funds, Bloomberg reported, and smart beta may fall victim alongside traditional actively managed funds as simple market cap weighting continues to trounce alternative weightings.
At the time of our May article, we said that time-tested “investment principles such as risk-based investing … and diversification … could have been thrown out the window in favor of investing in just one style: U.S. equities, and technology growth stocks in particular.” We noted that quant funds were already seeing an exodus of investment accounts.
Regards,
Ted
https://www.etf.com/sections/etf-strategist-corner/year-smart-beta-died
