Abstract
Investors are struggling to get a handle on alternative equity index strategies, which are proliferating. These strategies are widely known as smart beta. The typical route of using prepackaged index strategies, which mix stock selection and diversification, is not the way to go, warn <b>Noël Amenc</b>, a Professor of Finance at EDHEC Business School in London and Director of the EDHEC-Risk Institute; <b>Felix Goltz</b>, Head of Applied Research at the EDHEC-Risk Institute; and <b>Ashish Lodh</b>, a Quantitative Analyst at ERI Scientific Beta. Conventional prepackaged index strategies expose investors to additional risk factors that they may not want to include in their portfolios. Instead, the trio recommends that investors adopt a two-step approach that meets their own risk parameters. In this Practical Applications report, Amenc outlines the two-step approach explored in <b><i>Choose Your Betas: Benchmarking Alternative Equity Index Strategies</i></b>, which was published in the Fall 2012 issue of <b><i>The Journal of Portfolio Management</i></b>.
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