Strategic Beta Group

The strategic beta group is a classification of the overall strategic beta strategy being employed by the index as a result of its selection and weighting methodology. This attribute helps investors hone in on groups or strategic beta investments with similar objectives.

Also referred to as “smart beta,” strategic beta refers broadly to a growing group of indexes and the exchange-traded products and other funds and investment products that track them. The majority of these indexes seek to enhance returns or minimize risk relative to a traditional market-capitalization-weighted benchmark. Others seek to address oft-cited drawbacks of standard benchmarks, such as the negative effect of contango in long-only commodity futures indexes and the overweighting of the most-indebted issuers in market-cap-weighted fixed-income benchmarks.

These benchmarks and the investable products that track them exploit many of the same “factors” (size, value, quality, momentum) in order to mitigate risk in a manner similar to active managers. This group represents a middle ground on the active/passive spectrum, deviating from a traditional strictly passive market portfolio, but doing so in a rules-based, transparent, and relatively low-cost manner.