Colin McLean, FSIP, is founder and CEO at SVM Asset Management, an independent Edinburgh-based fund management group. He is a member of CFA Institute and was elected to the Board of Governors in 2012. McLean is a fellow of the Institute and Faculty of Actuaries and a chartered fellow of the Chartered Institute for Securities & Investment. In 2012, McLean was appointed an honorary professor at Heriot-Watt University, lecturing in behavioral finance. He is a regular contributor to financial publications and has been a guest on Bloomberg TV & Radio, CNBC, BBC TV and Radio. McLean is also a frequent conference speaker on investment, hedge funds and behavioral finance.
Investors love stories. Narratives can help to make sense of facts and figures. Stories can convey meaning by juxtaposing often unrelated information, and they offer hope. But not all stories have happy endings. The latest chapter of the emerging markets growth story has come as a nasty surprise to many, and there may be worse to come.
Now that the world's largest asset manager manages considerably more money than the world's largest bank, it's time to think about the potential for systemic risk.
Smart beta is an impressive investment branding story. The name neatly encapsulates the idea of beating conventional indices consistently but with little effort and much lower costs. Intellectually seductive, it conveys the concept of market exposure that avoids the costs and behavioral failures of active managers.