Scientific Beta

Benefits and Pensions Monitor: "Scientific Beta researchers have failed to find evidence that smart beta strategies have been adversely affected by a crowding effect. In its ‘Crowding Risk in Smart Beta Strategies’ white paper, it says as smart beta strategies gain in popularity, there are concerns that flows into these strategies will ultimately cancel out their benefits. However, such claims are rarely based on solid empirical evidence, it says."

Benefits and Pensions Monitor 19/05/2020

"(...) Scientific Beta researchers have failed to find evidence that smart beta strategies have been adversely affected by a crowding effect. In its ‘Crowding Risk in Smart Beta Strategies’ white paper, it says as smart beta strategies gain in popularity, there are concerns that flows into these strategies will ultimately cancel out their benefits. However, such claims are rarely based on solid empirical evidence, it says. The academic literature has not only documented risk premia for the standard factors, but has also provided theoretical explanations for persistence, notably if factors are compensation for taking on additional types of risk. Moreover, precautions against crowding risks can be taken by proper implementation of factor investing and smart beta indices. In particular, the best precaution against crowding seems to be diversification. (...)"