As investors’ expectations on advisor alpha shift from education and planning to portfolio performance, MFDs need to embrace the rapidly growing segment of smart beta funds to deliver on these expectations.
Factor based smart beta funds are outperforming, are low cost, are innovative and responsive to investor needs and market conditions –attributes that make them stack up well against active funds.
Factor based smart beta funds globally are divided into 3 categories – macro factors, statistical factors and fundamental/style based factors. In India, fundamental/style based factors such as growth, quality, value, momentum, volatility etc have been launched with good success.
In India, momentum/alpha based funds, low volatility funds and equal weighted index funds are the most popular out of a rapidly growing range of smart beta funds.
Smart beta funds – due to their inherent rule based discipline – allow advisors and distributors to achieve optimal style diversification in clients’ equity portfolios, without any surprises of active managers straying away from stated styles due to market conditions.