One of the biggest challenges ‘smart beta’ investors face is this: Which investment style to access and when to access it?
Axa Rosenberg has analysed how various smart beta risk premia perform in relation to the corporate earnings cycle and, in an article for Funds Europe, the firm concludes that now could be a good time for US and global equity investors to access the quality premium.
Quality stocks tend to be less exposed to balance sheet weakness in times of distress and more exposed to companies with better earnings as the earnings cycle matures, according to Axa Rosenberg. The US corporate earnings cycle is now six years past its trough – but the earnings cycle could last longer than usual due to the scale of the stimulus package used to create growth during the financial crisis.
How to determine the best smart beta strategy (or combination of strategies) for their portfolio was the most common concern for respondents in a FTSE Russell smart beta survey published in May, and more about strategy combination can be read in Funds Europe’s recent Smart Beta 2015 report.
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