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Smart Beta: Broken by Design?

Investors Can’t Have Their Cake and Eat It Too

Nicolas Rabener
10 min read
11 Feb 2019

SUMMARY

  • Smart beta excess returns are different from factor returns
  • The Low Volatility factor shows the highest discrepancy between theoretical and realized returns
  • Investors might be better served by embracing long-short factor products

REALITY DYSFUNCTION

Steve Jobs’s “reality distortion field” warped Apple employees’ perception of what was technically possible. Though it led to many internal conflicts, it also drove Apple to create world-changing products like the iPhone.

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