Recent market commentary has raised concerns around crowded trades that could adversely affect smart beta strategies, writes Gaurav Mallik, global head of equity strategies at State Street Global Advisors.
When it comes to investing in smart beta strategies, regardless of the prevailing market environment, consider the following points. Firstly, the need to invest in factors that have been well researched and documented over time with a strong investment thesis that they will deliver a durable premium versus a market-cap based index over the long term (five-to-ten years). Secondly, focus on valuations. It is important to understand there might be intermittent periods of underperformance precisely because of mean reversion in valuations. Finally, rather than 'chasing performance', inv...
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