Smart beta gaining traction

Smart beta investment strategies are returning better results than their active manager counterparts, when weighted using the FTSE RAFI Australia 200 Index.  

Although 2013 was a strong year for the S&P/ASX 200, which returned 20.2 per cent over the calendar year, the benchmark index was outperformed by the FTSE RAFI Australia 200 Index, which returned 25.5 per cent over the same period.  

The median active manager returned 23.2% over the 2013 calendar year according to Mercer’s Investment Performance Survey, which means it also underperformed the FTSE RAFI Australia 200. 

Commenting on the results, Betashares managing director Alex Vynokur said smart beta was starting to gain momentum.  

“We were encouraged to see that even with strong performance of many active fund managers compared to the S&P/ASX 200, the RAFI methodology outperformed both the S&P/ASX 200 and many active managers during 2013,” Vynokur said.  

 “According to the recent Towers Watson data, institutional investors made over twice as many new investments in smart beta strategies during 2013 compared to the year before, with a total of over $32 billion invested in smart beta strategies globally.  

“We expect Australian investors and their advisers will continue to adopt smart beta due to its intelligent approach, performance potential compared to traditional indices and relatively low costs compared to active managers,” Vynokur said. 

The FTSE RAFI Australia 200 Index measures companies on their total “economic footprint”, as opposed to net worth alone.