“It takes a multi-factor approach that blends various smart beta factors for a great consistency of performance,” Hyman said.
The underlying index then optimizes the portfolio, using the scores of the 10 screened factors to overweight stocks with the most favorable outlooks and underweight or short positions in company stocks with less favorable prospects. Lastly, the portfolio will end up with 130% long exposure and 30% short exposure, based on the weightings from the factor scores.
“If you’re looking for a tactical trade, by all means focus on a single factor smart beta ETF, but if you’re looking for buy-and-hold, you can look to a multi-factor approach,” Hyman added.
CSM has outperformed on a consistent basis. The smart beta ETF is up 17.4% year-to-date, compared to the S&P 500’s 17.3% return. The fund also generated an average annualized return of 17.1% over the past five-years, compared to the S&P 500’s 16.1% return.
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