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A0403
Title: Smart beta second generation: Evolution of smart beta towards a continuously adapting investment process Authors:  Alain Groshens - NovumC (China) [presenting]
Abstract: Based on a recent Smart Beta (SB) investors survey and two decades of practice, we describe and explain the SB investors needs, preferences and requirements governing the evolution of systematic and quantitative factor investing into what we call Smart Beta Second Generation (SB2G). We will focus our analysis and examples within the multi-asset strategy space. First we layout the survey results: the perceived benefits and shortcomings of SB strategy. We acknowledge the requirement to consider the risk adjusted performance as a primary investment strategy objective. We note the rejection for historical data dependent rules and market blind deterministic allocation process of SB strategies. Subsequently, we discuss the principles and processes that lead to the concept of SB2G: 1- A continuously adaptive investment process integrating and linking asset screening, allocation process and portfolio implementation. 2- SB2G includes human supervision and its investment bias within a rule based, yet adaptive investment process. 3- The performance is a primary objective of the process. 4- SB2G implementation relies on an allocation driver application that continuously recalibrates and feeds the investment processes with live market data and qualitative variables such as market sentiments. At last, we describe an actual SB2G multi-asset strategy in production.