Smart-Beta ETFs Employ Active Strategies

  • Goldman Sachs webcast sheds light on market outlook
  • Warning of more frequent but historically normal bouts of volatility ahead
  • Investors should monitor a potential Chinese hard landing, oil price swings, surge in U.S. dollar

In a difficult market environment, exchange traded fund investors may pick their battles with a disciplined smart-beta strategy that combines multiple actively managed investment styles in an index-based investment.

On the recent webcast, Goldman Sachs Asset Management Market View With ActiveBeta ETFs, Candice Tse, Vice President of Strategic Advisory Solutions at Goldman Sachs Asset Management, helped shed light on the market outlook.

For instance, Tse argues that with equities near full valuation, earnings growth and cash flow generation will have a large effect on returns ahead. While U.S. valuations may be fully priced in, relatively cheaper international markets may leave room for opportunities.

“This bodes well for Europe and Japan, in particular,” Tse said.

In the fixed-income market, Goldman Sachs believes government bonds are pricey after low-inflation expectations, excess savings and central bank actions pushed up valuations. On the other hand, investors may find better value in U.S. corporate debt.

“We see value in US corporate credit where valuations are consistent with recession, but fundamentals are not,” Tse added.

Moreover, Tse warned of more frequent but historically normal bouts of volatility ahead after enjoying an extended bull market and period of low equity volatility.

Specifically, investors should monitor a potential Chinese hard landing, further oil price swings, surge in the U.S. dollar and accelerating monetary policy tightening.

Consequently, investors may want to turn to alternative investment strategies to better navigate the changing market conditions.