Facilitated and written by: Malcolm Kerr and Tarryn Grant, EY
Sponsor introducing: Ben Seager-Scott, Tilney Investment Management
Headline Finding 1:
Smart Beta 101 – Umbrella term for rules based investment strategies.
A product that is passively followed by a fund manager and uses an index that takes advantage of perceived systematic biases in conventional indexes such as the FTSE 100.
They are cheaper than actively managed funds as they trade automatically but more expensive than conventional indexes.
Tilney are launching a range of Smart Beta Funds.
Headline Finding 2:
Attendees believed Smart Beta to be an attractive proposition and success can be secured if it is explained to the client correctly. This could be challenging for all but sophisticated investors.
Headline Finding 3:
Some advisers use passive strategies in order to stretch their advice fee but still keep the total proposition fee in line with competitors. However, the group felt that clients are becoming savvier and are starting to ask what their advice fee is getting me?
The group felt it was important to have that conversation with client to ensure that they know their goals and how they can be reached. Smart Beta can outperform active management and does about 75% of the time. This can help clients with smaller investment pots achieve their goals and beat the costs of DFM.
Headline Finding 4:
Some attendees felt Smart beta could be the bridge between Active and Passive strategies. There is a future where Smart Beta may become a hybrid of the two strategies. At present there are a small number of funds but these numbers are growing. Not heavily used but uptake is increasing.
Any next steps?
We think there is still room for Owen James to encourage debate around the pros and cons of active, smart beta and conventional beta funds.