Smart beta exchange-traded funds have become popular among investors disappointed by the performance of higher cost, actively managed mutual funds, according to researchers from the ESSEC Business School. But they are the best choice among ETFs?
“Smart beta funds do not offer a risk-adjusted performance superior to active and passive strategies,” ESSEC finance professors François Longin and Makram Belallah and business school student Youssef Louraui said in a paper this month. Still, smart beta ETFs, which invest using a hybrid of active and passive strategies, have seen strong growth in assets, which the authors pegged at about $560 billion last year.