Wall Street’s Hottest Investment Idea May Be Getting Too HotBy
Factor-based ETFs see assets balloon past $500 billion
Popularity increases chance of short term crashes, says Asness
Internet stocks, the Nifty Fifty, Crocs — Wall Street’s littered with examples of what can go wrong when market fads run amok.
Is the same fate awaiting the increasingly popular investment style known as smart beta?
Among securities industry professionals, the threat level is rising. Concern stems from a surge in money chasing strategies that slice and dice the market based on various stock traits, factors like cheapness or volatility. Assets in these smart beta exchange-traded funds, which use methods that are similar to actively managed portfolios but are in a passive instrument, just topped $500 billion for the first time…
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