Lyxor Asset Management says European active managers are using ‘smart beta’ – generally seen as a form of passive investing – to beat their benchmarks.
According to the firm, which provides smart beta products, 90% of the returns for nearly half of European domiciled active funds in the study period were due to specific risk factors that are usually considered as smart betas, such as low size, value, quality, low beta and momentum.
European active fund managers overweighted low beta, momentum and quality factors in 2015, which all outperformed benchmarks, said Lyxor.
Lyxor also compared the performance of there active funds to smart beta minimum variance indices, which are designed to reduce portfolio volatility and found only 14% beat the smart beta index, compared to 72% of active funds that beat a traditional market-cap weighted index using smart betas.
Smart beta generally denotes a system based on indices that do not arrange constituents by market capitalisation, but by other smart beta factors.
Lyxor manages about €12 billion in smart beta strategies.
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