Investnet Custodians Add Smart Beta Funds to Mailing List
Investnet’s group of portfolio management consultants (PMCs) plan to add smart beta funds to their list of recommended products for the first time.
The company has conducted due diligence on a number of strategic beta offerings and will begin adding more to its priority list next week.
“ We’ve really seen, over the last two decades, really noticeable growth in strategic beta as a whole across the industry, and it really has shown some persistence, ” said Sarah Abernathy, analyst at senior investment at Envestnet PMC, which is leading the initiative.
Abernathy is the Subject Matter Expert for Strategic Beta and Factor Based Investment Due Diligence on PMC’s multi-asset team, which includes four other analysts.
Tim Clift (pictured below) leads the Envestnet PMC team as Chief Investment Strategist.
Abernathy said the team has so far reviewed between 10 and 15 strategic beta products from asset managers such as BlackRock, Northern Trust and DWS, but declined to say how many strategies have been approved for the recommended list.
Strategic beta investments that meet PMC’s standards will first be executed on its approved qualitative list, with the ultimate goal of being added to the most exclusive picklist.
Abernathy also said that no strategy would be removed from the list to make room for new additions, and that the due diligence process for these funds is broadly consistent with the team’s broader approach.
“It captures a lot of what traditional active managers have always targeted,” Abernathy said. “What we want to see is that most of the returns come from specific factors, whatever goals they are trying to target in this portfolio. We don’t want to see a lot of idiosyncratic risk from these types of strategies, and it’s contrary to what we expect from an active strategy, where what we pay for is that idiosyncratic skill of the manager.
While this is the PMC Group’s first foray into approving strategic and factor beta strategies, Envestnet is also home to a unit called QRG Capital Management, which manages 13 strategic SMA beta portfolios.