Our high-level thesis is that while outsized returns in excess of benchmarks can be generated by a small number of managers, it is generally very hard to get retail money invested with any of these managers. That said, financial innovation, largely in the form of ETFs, has given retail access to cost and tax-effective strategies which can vastly improve the performance, and importantly, volatility, and drawdown characteristics of retail investment portfolios.
The huge increase in ETFs and their transparency and disclosure of positions on a daily basis, is akin to bringing the open source movement to securities analysis. It allows individual investors and advisors to employ strategies and express views which previously would have required highly sophisticated hedge funds or institutional investors to execute.
Beta is free.
But note smart beta has converted factors that had previously been considered alpha to be converted into beta. So much of what used to be alpha is now also very close to free. think factors like value, momentum, quality ... Of course, some managers continue to find new and hard to access source of alpha - but most of these managers are out of the reach of all but the deepest pocketed investors.
Deep drawdowns make people do silly things. There are now plenty of ETF options, which will insulate your portfolio from large drawdowns and allow you to stay at the course. We will use this blog to present such strategies