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Rekenthaler Report

How Should Investors Time Their Investment Strategies?

A conversation with Rob Arnott.

Being Smart About Strategic Beta
In February, Rob Arnott, founder of Research Affiliates, wrote “How Can 'Smart Beta' Go Horribly Wrong?” The article has since been widely cited--including by a story memorably headlined, “The Godfather of Smart Beta Says That Smart Beta Is Stupid”--as well as disputed. Most notably, AQR chief Cliff Asness penned an aggressive rebuttal. (Arnott and Asness will continue the debate at the annual Morningstar Investment Conference.)

The topic: To what extent should investors consider current market conditions when investing in “smart beta” funds? In a nutshell, Asness says only rarely, while Arnott advocates greater activity. (The two agree on this topic far more than they disagree, but the media--and perhaps also the participants--enjoy a scrap.)