Podcast with Dr. Taslimarif, Sample

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SMART Alpha

Blackrock, the world’s largest fund manager, is going to double sustainability-focused ETFs to 150 in the next few years. Rise of ETFs, especially in sustainable investing, also signifies a shift to passive investing. Exchange-Traded Funds (ETF) are not supposed to beat their benchmarks, i.e. it will have no Alpha and a beta close to 1. However, this has changed in recent times with the rise of Smart Beta. Using the ESG matrix as a benchmark beta, one can still over long term outperform the market. Emphasis on governance must be an issue in emerging markets. The trick is to compare plain vanilla ETF linked to an equity index to an ETF linked to ESG themes within the same index and parameters, i.e. market cap etc. Now check out the performance between the two ETFs. The difference is SMART Alpha.

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