Smart Beta is Dead

By Toroso Asset Management

At Toroso, all of our research begins by embracing the transparency of ETFs and understanding their construction. We conduct this research using the tools and resources within our ETF Think Tank. Every study requires a common language or nomenclature as a starting point for classification. This necessary condition is what lead us to question the term “Smart Beta” in previous post:

Our working definition at that time was:

Smart Beta is defined as any passive ETF that is not traditional Beta. Traditional beta is any ETF that tracks an investable index solely based on market cap, geography, or sector.

As of today, we declare that the term “Smart Beta” is dead. A term that has no definition is meaningless and only serves to confuse and obscure the true innovations of the ETF ecosystem.

How Do You Kill a Term?

Each week, to express the progress of TETF.index, Toroso shares a list of industry key performance indicators (KPIs). We include various different growth metrics, revenue calculations and market share attribution. One of the KPIs looks at the percentage of revenue derived from “Smart Beta”:

ETF Industry KPIs