More than 100 financial professionals congregated in Fort Lauderdale, Fla., to attend the inaugural Investing In Smart Beta last week to hear more than 15 investment experts discuss rules-based strategies designed to complement or outperform market-capitalization weighted indexes.
The one-day event was chaired by Deborah Fuhr, managing partner of ETFGI. Her encyclopedic knowledge of both the ETF and smart-beta spaces continually challenged the expertise of a distinguished list of speakers. Advanced topics discussed in the different sessions included a comparison of the uses of Sharpe ratios and information ratios, and their implications for high-conviction versus low-conviction investing.
John Feyerer, vice president and director of equity ETF product strategy at Invesco PowerShares, and Michael Akins, senior vice president and head of ETFs at ALPs, anchored one of the more compelling sessions as they reviewed the different methodologies behind different smart-beta strategies.
Factor investing was a theme that ran through a number of sessions. Yazann Romahi, managing director and global head of quantitative research at J.P. Morgan Asset Management, and Lukas Smart, vice president and senior portfolio manager at Dimensional Fund Advisors, examined how factor investing diverged from other approaches to smart beta.
It was also a part of the conversation in a session that looked at size, style and sectors involving Holly Framsted, strategist at BlackRock’s iShares equity smart beta team, and Jeffrey Sherman, co-portfolio manager of the DoubleLine Shiller CAPE Enhanced Fund.
One intriguing takeaway was that the 25 to 30 percent of active managers who beat their benchmarks consistently all share one trait: they are factor-static and their style rarely drifts far from the factor they focus on.
Technical analysis guru Tom Dorsey of Dorsey, Wright & Associates talked about one of his favorite subjects, namely how to use technical methodology to take the emotion out of the investing equation.
On the international front, Nigel Emmett, managing director of J.P. Morgan Asset Management, and Nick Stonestreet, CEO of Vident Financial, discussed applications of smart beta to global investing. Emmett’s fund, the JP Morgan Diversified Return International Equity ETF (JPIN), blends smart beta with risk parity.
Other strategies discussed included quality, low-volatility and momentum as Arne Noack, director at Deutsche Asset Management, and Donald Robinson, CEO and Co-CIO at Palladium, looked at these strategies in depth.
One topic of conversation throughout the event was the remarkable success of low-volatility funds over the past decade. More than a few participants commented that one reason behind the stellar performance of minimum volatility funds is that many of the underlying stocks are blue-chip, dividend-paying multinational companies that have benefitted from investors searching for income in age of global quantitative easing.