With more money moving to passive strategies, there’s a subculture that falls under the rubric of “Smart Beta.” Smart Beta generally refers to non-market-cap-weighted, systematic strategies that aim to add value by improving returns and/or providing lower volatility compared with the market-cap index itself. Dimensional Fund Advisors has been the leader of Smart Beta among advisors, but there are other firms — primarily in the institutional market, like Research Associates — that are using it as well.
Plan advisors should always be looking for ways not only to distinguish themselves, but to help clients improve outcomes and returns. While most advisors use passive strategies in some form for most of their clients, the move to Smart Beta is real (free registration required) and needs to be examined closely.
