A few years ago, investing in mutual funds and exchange traded funds was simple. You had actively managed or passive index-based investments. Now, investors will have to discern the subtle differences in strategic- or smart-beta indices, a middle group that falls somewhere between active and passive strategies.

“There’s a difference between indexes that weight securities according to market capitalization, such as Vanguard’s offerings or any company’s S&P 500 funds, and indexes that incorporate viewpoints,” writes John Rekenthaler, Morningstar‘s Vice President of Research.

For instance, Research Affiliates’ Fundamental Indexes are among a growing crop of smart-beta index providers that allocate toward specific investment attributes, such as low-volatility that favors less risky assets, as opposed to traditional market-cap-weighted indices that tilt toward the largest company stocks.

Rekenthaler even argues that some of these smart-beta fund providers make claims that sound suspiciously active, which adds to his point that along with traditional active and passive fund strategies, we should also make way for strategic- or smart-beta index as a third distinct class.

“A passive fund is a fund that does not express a viewpoint,” Rekenthaler said. “An index fund is a fund that mimics a list of securities. Those are two different things. Thus, a strategic-beta fund is an index fund, but it is not a passive fund.”