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How to use smart beta to reduce your bond market risk
by Robert St George on Oct 17, 2013 at 09:30
‘I don’t think you want an algorithm making allocation calls for you,’ explains Ben Seager-Scott, senior research analyst at Bestinvest. ‘A computer will happily buy up 100-year bonds if someone stupidly floods the market with them.’
In any case, he notes that index providers will typically incorporate a base level of screening to refine constituents by at least one metric – credit rating or duration, perhaps – while smart beta bond funds are also closer in price to active vehicles than the simplest and cheapest trackers.
Yet he imagines their costs could still fall as they gain traction. ‘You don’t have to give a computer a pay rise for bringing in more assets,’ he added.
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by Alex Steger on Dec 11, 2013 at 10:19