Capacity of Smart Beta Strategies from a Transaction Cost Perspective

摘要

For BlackRock Managing Director Ronald Ratcliffe, the question of smart beta capacity is a business challenge rather than an intellectual exercise. "As the smart beta market grows, investors often ask us how big these strategies can get before they start losing efficacy," he says. In Capacity of Smart Beta Strategies from a Transaction Cost Perspective, published in the Winter 2017 issue of The Journal of Index Investing, Ratcliffe and co-authors Paolo Miranda and Andrew Ang set out to tackle one dimension of this timely debate.Using a transaction cost model that was developed by the BlackRock team for daily use, the authors estimate the hypothetical breakeven AUM at which the turnover transaction costs of an ETF would exactly offset the historically observed style premium. They perform the analysis for five different single-factor strategies based on momentum, quality, size, value, and minimum volatility, as well as a multifactor strategy based on the first four factors.