As an important part of investment funds, index funds have many indexes. Generally speaking, investors will invest in the more common market index funds or stock fund indexes. Today, I want to talk to you about index enhancement fund and Smart Beta, and see what is the difference between Smart Beta and index enhancement.

What does Smart Beta mean?

Smart Beta, represented by non-market value weighting, invests in specific fields or targets through transparent, rule-based or quantitative methods, so as to capture the risk premium, obtain excellent expected return of risk adjustment, and realize the goal of portfolio diversification.

What does exponential enhancement mean?

There is no uniform model for enhanced index investment. The only similarity is that everyone wants to provide investment performance higher than the return level of the underlying index. In order to make indexed investment worthy of the name, fund managers try to maintain the various characteristics of the underlying index.

What's the difference between smart beta and exponential enhanced version?

1, the expected income target and the expected income composition are different.

Expected income target: index enhancement aims at long-term surpassing the tracking index; SmartBeta has no specific performance benchmark, and only obtains the expected benefits brought by specific factors.

Composition of expected return: index enhancement mainly depends on the tracked index, followed by the excess expected return brought by stock selection; Smart Beta mainly depends on the content of stock selection and the factors used, and the expected return depends on both the index and the value factor.

2. Stability of excess expected return

Index enhances multi-factor stock selection and has tracking error constraints, so the excess expected return is relatively stable; Smart Beta depends on the volatility of specific factors, and the stability of excess expected returns is weaker than that of index-enhanced funds.

3. Product form

Index enhancement index enhancement is more common in the market index, such as CSI 300 and CSI 500. Smart Beta is mostly a purely passive product, which aims to closely track the index.

The above is the difference between Smart Beta and index enhancement, I hope it will help you. Warm reminder, financial management is risky and investment needs to be cautious.