Financial Geek

3 Examples of “Smart” Beta Investing with Dumb Results

Does “smart” beta exist? Not according to Ron DeLegge, Chief Portfolio Strategist @ ETFguide. Ron examines the real life historical performance of three allegedly “smart” beta ETFs in the global bond market that have delivered very dumb results. Furthermore, the unsatisfactory performance results have happened during one of largest bond bull markets in history! Ultimately, “smart” beta is really “alternative” or “strategic” beta and not much else.

3 thoughts on “3 Examples of “Smart” Beta Investing with Dumb Results”

  1. Are these funds even comparable to one another? The last example shows an EM local currency ETF against an ETF that holds USD issued bonds. Does the author realize these are two entirely different investment vehicles? comparing their returns serves no informative purpose whatsoever.

  2. Ronald Delegge

    Hi PD, all the examples cited are in the same corresponding asset class and are apples-to-apples comparisons. If you disagree with the categorization or labeling of the bond ETFs, take it up with Morningstar.

    1. They certainly are not apples to apples comparison. You can’t compare bond fund with currency risk to a bond fund without currency risk and draw any conclusions whatsoever about the underlying investment strategies. The currency return will drive all the differences! And they own 100% different bonds! There is zero overlap and this is the epitome of apples-to-oranges. You may as well compare an ETF of US technology stocks to an ETF of euro-issued utility corporate bonds and claim that “technology outperforms utilities”. There’s a lot more going on. And no, your cop-out at the end doesn’t make you look any smarter.

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