Smart beta funds for alpha

These Show Stronger Risk-Adjusted Returns & Lower Drawdowns In Volatile Markets

- SAIKAT NEOGI

AS GEOPOLITICAL TENSIONS between India and Pakistan escalate, investors should consider smart beta funds to protect the downside risks and generate alpha. These funds choose stocks based on factors such as low risk and steady growth, instead of just size like market-cap indices do.

Factor-based portfolios can outperform during uncertain environments and help investors earn better returns for the amount of risk taken. Smart beta funds have shown stronger risk-adjusted returns and lower drawdowns in stress periods. Moreover, the rebalancing mechanism also instills a systematic discipline, effectively buying low and trimming high.