Life Cycle Investing and Smart Beta Strategies

Posted: 3 Apr 2017

Date Written: March 30, 2017

Abstract

In traditional life cycle models, the equity-bond glide path shifts investment allocation from riskier assets to relatively safer assets as investors approach retirement. In this paper, we develop a smart beta glide path which seeks to take advantage of broad, persistent patterns within asset classes to identify securities with higher risk-adjusted returns than the market. Within equities, investors can shift from return-enhancing strategies — like value, momentum, size, and quality — to risk-reducing strategies like minimum volatility as they move through their life cycles. Adopting smart beta glide paths may improve Sharpe ratios by up to 20% over a standard equity-bond glide path.

Keywords: Retirement, Smart Beta, Factor Investing, Target Date Retirement Funds, QDIA

JEL Classification: G11

Suggested Citation

Carson, Bill and Shores, Sara and Nefouse, Nicholas, Life Cycle Investing and Smart Beta Strategies (March 30, 2017). Available at SSRN: https://ssrn.com/abstract=2943587 or http://dx.doi.org/10.2139/ssrn.2943587

Bill Carson (Contact Author)

BlackRock, Inc ( email )

55 East 52nd Street
New York City, NY 10055
United States

Sara Shores

BlackRock ( email )

55 East 52nd Street
New York City, NY 10055
United States

Nicholas Nefouse

BlackRock, Inc ( email )

55 East 52nd Street
New York City, NY 10055
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
2,264
PlumX Metrics