The signs of smart beta’s surging popularity are all around. First, an ever-increasing number of traditional active managers are getting into the smart beta game, from John Hancock to Goldman Sachs to, yes, even Fidelity, to name just a few recent entrants. Second, while investors have scurried to safe havens such as bonds and gold thus far in 2016, smart beta stock funds remain one of the few categories of risk assets that have seen inflows this year. Third, valuations for some smart beta strategies such as quality and low volatility are already high and rising, which speaks to investors’ appetites for those approaches.

Smart beta has always been cheaper than traditional active management, but the cost of smart beta will eventually rival that of passive management. A new Goldman Sachs smart beta ETF, for example, provides a glimpse of the future. It offers four active management styles -- value, momentum, quality, and low volatility -- for just 0.09 percent annually, which compares favorably with the 0.05 percent expense ratio of the Vanguard S&P 500 ETF.

Fidelity never showed much interest in passive management (Vanguard was long ago crowned king of that realm), but now it's in danger of ceding its hard won active management throne to smart beta. If Fidelity wants to regain its mojo as a market leader, it should make deep, meaningful cuts to fees on its actively-managed funds.

(This column does not necessarily reflect the opinion of Bloomberg LP and its owners.)

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