Jargon Buster: Smart Beta
Smart beta strategies, which are growing in popularity, attempt to provide a ‘third way’ of investing between expensive active management and cheap passive management. Smart beta effectively means investing in passive indices which are actively managed by an investment manager. Again though, different managers approach it in different ways, and call it different things: smart beta is also sometimes called low volatility investing, risk factor investing, or risk parity. It is mostly used by large schemes in the UK, due to its sophistication.