“Smart Beta” exchange traded funds, often attempting to mimic sophisticated hedge fund strategies in a typically “passive” investment product, is being given scrutiny from regulators.
$1 Trillion “smart beta” category coming under regulatory pressure for risk
Nishant Kumar and Simon Jessop of Reuters are reporting that the “strategic beta” fund category, which Lyxor Asset Management says is a $1 trillion category, is being critiqued by regulators regarding appropriate risk disclosure with a particular eye towards how the fund might perform during crisis.
Regulators in the U.S. and Europe "have concerns around the level of transparency and risk disclosures," Patrick Armstrong, senior expert of financial innovation at the European Securities and Markets Authority, was quoted as saying....
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