Investors are probably unaware of the price they are paying for the "active" piece of Smart Beta. Using a simple framework, we show that buying a Smart Beta product at 45bps is equivalent to paying 5bps for a generic passive exposure and 138.33 bps for the active exposure! How many investors are aware that "low-cost" smart beta products might be implicitly charging fees that are equivalent to many active mutual fund fees?
Patient Capital Outperformance Cremers and Pareek A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic [...]
Ken French has a wonderful paper called the Cost of Active Investing. He presented the paper at the 2008 AFA Presidential Address. I compare the fees, [...]
Everyone knows there is no such thing as a free lunch, but in investing you often have to pay for a lot more than just [...]
The Turnkey PhD and I were talking this afternoon about how egregious fees can get in the active money management business, with managers routinely charging [...]
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