What Did We Learn from Billionaire Cliff Asness’ Presentation at the Bloomberg Summit?

Among other things, Asness also talked about the ‘Smart Beta’, which he noted has been a hot investing fad lately. The ‘Smart Beta’ is an investment style that uses metrics outside of the traditional market capitalization to weigh a portfolio and it could balance a portfolio using book value or Shiller P/E, instead of market cap, for example. The investor added that, while Smart Beta works, it has been around for a long time and it is just a new name for an existing product.

Lastly, Asness said that ‘risk parity’ strategies were likely not the cause of the August’s volatility spike, although he can’t be 100% sure. The funds that practice risk parity are too small relative to the overall market. Asness noted that risk parity strategies are basically trend-following strategies, where fund managers buy things that go up and sell things that go down and trend-followers likely did exacerbate some of the August’s volatility.

Disclosure: none