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Strategic Beta: Widely Known, Little Understood

A Columbia Threadneedle Investments survey finds almost all advisors know about strategic beta investing, but few are confident in implementing it.

When it comes to so-called strategic beta investing, the marketers have done their jobs, even if the portfolio managers have yet to make their case. Almost all financial advisors know what “strategic beta” investing is, but only one-third feel they have the confidence to implement it in client portfolios, according to a recent survey.

The survey, by Columbia Threadneedle Investments, found 98 percent of advisors knew about the factor-weighted investing style, but only 36 percent felt they could effectively implement it. Whether that is because they have doubts about the strategies, or feel they don’t have the technical knowledge to bring clients into the portfolios in the right way, wasn’t clear.

“Practical advisor education remains essential,” said Marc Zeitoun, Head of Strategic Beta at Columbia Threadneedle Investments. “The best investment solutions won’t help anyone achieve financial success if they aren’t implemented effectively."

The top reason the survey found for incorporating strategic beta into a portfolio? Enhanced diversification, with 38 percent of advisors. One-quarter said it was to gain access to the factor weights, while 17 percent said it was to bring in “active manager insights” into a passive portfolio.

The survey of 299 advisors also found that very few—18 percent—could name the fund managers of the strategic beta exchange-traded funds they used regularly, while 27 percent could do so for the actively management mutual funds they used.

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