The term smart beta is becoming more and more popular in describing indexes that, in short, diverge from a typical market capitalization-weighted approach. With such indexes, we believe that it is critical to understand the different tilts and biases introduced by the stock selection and constituent weighting rules of each index.
Over the past nine months, the Federal Reserve (Fed) has gradually reduced the pace of its asset purchases in conjunction with an improvement in the strength of the U.S. economy. With “tapering” expected to end October 29, we believe that investors should now look beyond 2014 and start to focus on when, not if, the Federal Reserve will raise the Federal Funds Rate.
Falling interest rates have created a shortage of income-producing assets. Real estate, in our view, is one possible solution that not only produces an income stream, but also is a direct beneficiary of the low global interest rate environment as a large borrower of loans.
The discussion of currency-hedged strategies has shaken some of the core beliefs of investors. Traditional investment vehicles that package equity risk plus a secondary currency risk on top of the equity risk have been referred to as the traditional “plain vanilla” exposure because they were the first to the market, and it is what investors have been using for so long.