Smart Beta That Is Actually Smart

“Smart Beta” — the attempt to turn investment factors into indices that can be turned into cheap tracker funds or exchange traded funds — has become one of the investment industry's biggest earners. But the rush to identify new anomalies that can be turned into indices, and then lay claim to them in the academic literature, is beginning to resemble the rush to patent new drugs. The total number of “smart beta” factors identified so far comes to 458.