What is Strategic Beta?

Strategic beta strategies systematically create a portfolio of securities that differ materially from passive, core market capitalization-weighted indices. Through alternative weighting rules, strategic beta products seek to perform better and/or with less risk than market capitalization-weighted benchmarks.

Factor-based investing is an important subset of the strategic beta universe that refers to systematically managed strategies that weight holdings based on academically vetted, rewarded risk factors. In addition to the market factor, the most widely recognized rewarded factors include Value, Quality, Momentum, Size and Low Volatility.

Our Approach to Strategic Beta

Increasing availability of strategic beta products means investors are no longer tied to paying traditional active management fees for what may amount to systematic beta exposures. As a result, investors can more efficiently allocate fee budgets to focus on paying lower fees for factor exposures and only paying higher fees for unique manager skill.

As the availability and complexity of these products has grown, so too has the due diligence burden involved in their evaluation. We offer multiple tools and resources to help navigate this universe:

  • Select List: These are the highest conviction strategic beta strategies identified by our research team, and will include products meant to gain exposure to rewarded risk factors.
  • Approved Lists: The Envestnet platform highlights the following types of approved strategic beta products:
    • Approved – Quantitative: These products have met various quantitative screens for cost, liquidity and performance (which includes an assessment of factor exposure).
    • Approved – Qualitative: In addition to the rigorous due diligence standards in place for all active strategies reviewed by our research team, strategic beta strategies are evaluated with a particular sensitivity to the strength and consistency of exposure to targeted factors and diversification of non-targeted factor exposures.
  • Strategic Beta Flag: Products that meet our definition of strategic beta are flagged and searchable on the Envestnet platform.
  • Thought Leadership: Thought leadership and guidance regarding strategic beta and its uses, including a foundational overview of the strategic beta landscape.


Browse All Resources

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  • Brochure
    Quantitative Portfolios

    Quantitative Portfolios (QPs) are a suite of asset class-specific investments that blend the benefits of “beta” investing with the portfolio customization of managed accounts.

  • Strategies
    Factor-Enhanced Quantitative Portfolios

    The Factor-Enhanced QPs contain a subset of the constituents of a major market index and are designed to provide increased exposure to three key factors prominent asset pricing factors—momentum, value, quality, and low volatility—that historically have provided improved risk-adjusted results over the long term.

  • Whitepaper
    The Impact of Strategic Beta on the Managed Product Landscape

    Born of a steady evolution of academic theory, strategic beta has matured into full-blown investability with the advent of indexation and advances in technology and big data.

  • Brochure
    Strategic Beta and Factor-Based Investing

    It combines active management acumen to capture compensated sources of return with the objectivity of rules-based, repeatable implementation processes to reign in fees, resulting in active management packaged at a passive price point.

  • Article
    Envestnet Gatekeepers add Smart beta Funds to Focus List

    Envestnet’s Portfolio Management Consultants (PMC) group plans to add smart beta funds to its recommended list of products for the first time. 

  • Study
    Factor Performance and the Market Cycle

    In this study we have analyzed the performance of factor portfolios and their components throughout various market cycle sub-periods.