401(k) Specialist Issue 1 - 2017 - 6
EDITOR'S LETTER
Dumbing Down Smart Beta
PUTTING SCARAMUCCI ON THE COVER has my hysterical friends bemoaning the
Orwellian language employed by White House surrogates, alternative facts being a favorite.
How they just now hit upon the idea that presidents and their administrations
might use creative language to soften the blow of a hyper-partisan hammer is beyond
me, and a subject for another day (or night, usually involving booze, smokes and " Fox
News " as a derogatory epithet).
Any introductory college communications course reveals the reason-control the
language and you control, or at least frame, the argument. It's critical to success,
whether with political debate or product distribution.
Hence smart beta, a terrific term straight from a futuristic, dystopian bestseller
which needed no assist from Dear Leader, as if a mathematical measure of a security's
volatility somehow possesses anthropomorphic intelligence. The inference of course
being that it's a smart strategy and you'll be smart by extension for using it.
But is it?
Investors are flooding smart beta ETF products, which look for undervalued gems
hiding in plain sight, rather than relying on more traditional, factor-based weightings
like market-cap. A proliferation of smart beta funds have recently launched, and
are now seeping (crashing?) into the 401(k) space. Investing behemoth Blackrock
launched a smart beta target date series in December, and the so-called Trump rally is
fueling demand overall, which naturally has industry watchers worried.
" People are making classic mistakes with a shiny new set of toys, " Ben Johnson,
head of ETF research for Morningstar, recently told The Wall Street Journal.
" One of the most outspoken critics of the explosive growth of smart beta is Rob
Arnott, the founder and chairman of Research Affiliates and widely considered the
godfather of the smart-beta movement, " the Journal added. " In a paper published
last year, he said the surge into smart beta may inflate company stock prices, " before
warning of the likelihood of a smart beta crash as a result.
Don't get us wrong-we're not here to criticize the strategy or its use; rather to temper
excitement (including our own) that could lead to bad outcomes.
And part of this may be personal. While not technically a smart beta strategy, we
nonetheless noticed the lag a few years back between surging gas prices and underlying
energy company stocks, fancying a solid value opportunity. We got crushed.
It reinforced how ungodly unsophisticated we are in market movements and the
multitude of influencing variables therein, and has us questioning the appropriateness
of strategies like smart beta for the average 401(k) plan participant.
ONLINE
EXTRA
John Sullivan
Editor-in-Chief, 401(k) Specialist
6
ISSUE 1 2017 | 401kSpecialistmag.com
http://www.401kSpecialistmag.com
401(k) Specialist Issue 1 - 2017
Table of Contents for the Digital Edition of 401(k) Specialist Issue 1 - 2017
Table of Contents
401(k) Specialist Issue 1 - 2017 - Cover1
401(k) Specialist Issue 1 - 2017 - Table of Contents
401(k) Specialist Issue 1 - 2017 - 1
401(k) Specialist Issue 1 - 2017 - 2
401(k) Specialist Issue 1 - 2017 - 3
401(k) Specialist Issue 1 - 2017 - 4
401(k) Specialist Issue 1 - 2017 - 5
401(k) Specialist Issue 1 - 2017 - 6
401(k) Specialist Issue 1 - 2017 - 7
401(k) Specialist Issue 1 - 2017 - 8
401(k) Specialist Issue 1 - 2017 - 9
401(k) Specialist Issue 1 - 2017 - 10
401(k) Specialist Issue 1 - 2017 - 11
401(k) Specialist Issue 1 - 2017 - 12
401(k) Specialist Issue 1 - 2017 - 13
401(k) Specialist Issue 1 - 2017 - 14
401(k) Specialist Issue 1 - 2017 - 15
401(k) Specialist Issue 1 - 2017 - 16
401(k) Specialist Issue 1 - 2017 - 17
401(k) Specialist Issue 1 - 2017 - 18
401(k) Specialist Issue 1 - 2017 - 19
401(k) Specialist Issue 1 - 2017 - 20
401(k) Specialist Issue 1 - 2017 - 21
401(k) Specialist Issue 1 - 2017 - 22
401(k) Specialist Issue 1 - 2017 - 23
401(k) Specialist Issue 1 - 2017 - 24
401(k) Specialist Issue 1 - 2017 - 25
401(k) Specialist Issue 1 - 2017 - 26
401(k) Specialist Issue 1 - 2017 - 27
401(k) Specialist Issue 1 - 2017 - 28
401(k) Specialist Issue 1 - 2017 - 29
401(k) Specialist Issue 1 - 2017 - 30
401(k) Specialist Issue 1 - 2017 - 31
401(k) Specialist Issue 1 - 2017 - 32
401(k) Specialist Issue 1 - 2017 - 33
401(k) Specialist Issue 1 - 2017 - 34
401(k) Specialist Issue 1 - 2017 - 35
401(k) Specialist Issue 1 - 2017 - 36
401(k) Specialist Issue 1 - 2017 - 37
401(k) Specialist Issue 1 - 2017 - 38
401(k) Specialist Issue 1 - 2017 - 39
401(k) Specialist Issue 1 - 2017 - 40
401(k) Specialist Issue 1 - 2017 - 41
401(k) Specialist Issue 1 - 2017 - 42
401(k) Specialist Issue 1 - 2017 - 43
401(k) Specialist Issue 1 - 2017 - 44
401(k) Specialist Issue 1 - 2017 - Cover3
401(k) Specialist Issue 1 - 2017 - Cover4
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