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ETF Specialist

Have Strategic-Beta Bond ETFs Outsmarted Their Peers?

The jury is still out.

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A version of this article was published in the June 2017 issue of Morningstar ETFInvestor. Download a complimentary copy of ETFInvestor here.

Go is a board game played on a 19-by-19 grid where each player makes one move per turn in an effort to capture territory on the board. A typical game lasts approximately 150 moves with an average of 250 potential variations per move, suggesting a level of game complexity of 10360, according to calculations from Victor Allis, a computer scientist. By contrast, a chess game's estimated complexity is 10123. In May, AlphaGo, the Google-made Go program, defeated the world's top-ranked Go player, Ke Jie. AlphaGo's victory adds another trophy to the shelf for artificial intelligence. Will algorithmic approaches to building bond portfolios get the best of flesh-and-blood bond managers, too?

Phillip Yoo does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.