Scientific Beta

The Asset: "With the increasing popularity of smart beta strategies due to the inherent transparency of the process, some investors are concerned that increased inflows into the space will lead to a crowding risk and ultimately lower returns. (...) However, Goltz notes, Scientific Beta has examined the smart beta indices and found that there is no specific evidence to support the theory that more investors pursuing smart beta strategies lower long-term returns."

The Asset 16/07/2020

"(...) With the increasing popularity of smart beta strategies due to the inherent transparency of the process, some investors are concerned that increased inflows into the space will lead to a crowding risk and ultimately lower returns. (...) However, Goltz notes, Scientific Beta has examined the smart beta indices and found that there is no specific evidence to support the theory that more investors pursuing smart beta strategies lower long-term returns. (...) Thus, the crowding risk theory, Goltz concludes, is not based on data or substantial evidence, and, in fact, it is not beneficial to investors as it argues that there is probably something wrong with too much transparency. “I would argue it’s the opposite,” he states. “We should have more transparency because if index providers are completely transparent and provide a lot of analytics on how the indices behave, then we would rely less on theories and hypotheses.” (...)"