MASTERING THE MARKETS | Smart Beta
B
roadly, smart beta can be
defined as an umbrella concept
for rule-based investment
strategy or strategies that don’t use
the traditional market capitalization
weightings which are often criticized
for giving sub-optimal returns by
giving greater weight to overvalued
stocks and thereby underweighting the
undervalued stocks.
The interest in smart beta was
triggered after the global financial crisis
during 2007-08, prompting investors
to focus more on controlling risks than
just strive for maximization of return.
It also reflects the changing trends
in the world of investment. Over the
years, investors increasingly opted for
index investment owing to its inherent
transparency, lower fees, consistency
and passive management. But the
interest in non-ma