Analysis of the Performance Between Smart Beta Strategies With Active and Passive Managed ETF

Although the Exchange Traded Fund (ETF) business has grown in popularity with investors over the last decade, it remains a shadowy sector with certain technicalities. This research piece will discuss the origins of this notion and its subsequent trends by explaining its primary characteristics and theoretical background. To address the primary research question, we will conduct a comparative analysis of Smart beta ETFs, actively managed ETFs, and passive ETFs in order to quantify the outperformance of Smart beta strategies. Our research group will be completed with eight distinct ETF funds representing each investment strategy being compared to their respective benchmark. The Sharpe, Sortino, and Jensen ratios are used to calculate the overall risk-adjusted returns. We came to two distinct conclusions: US large-capitalization equity Smart Beta funds do not outperform active or passive strategies in terms of risk adjusted returns. Despite this, and contrary to academic research, emerging markets equity smart beta funds had significantly larger excess returns than other types of investment funds