RT Journal Article SR Electronic T1 Optimal Blending of Smart Beta and Multifactor Portfolios JF The Journal of Portfolio Management FD Institutional Investor Journals SP 93 OP 105 DO 10.3905/jpm.2018.44.4.093 VO 44 IS 4 A1 Frederick E. Dopfel A1 Ashley Lester YR 2018 UL https://pm-research.com/content/44/4/93.abstract AB As smart beta investments in institutional portfolios have grown—along with the additional complexity introduced by multifactor approaches—there is an emerging need for guidance on how to allocate across the ever-increasing array of smart beta products. Smart beta and multifactor investments are exposed to a common subset of elementary smart betas, combined with more idiosyncratic residual exposures. Accounting for the incidental exposures to common factors as well as the idiosyncratic exposures is necessary in designing a well-diversified and efficient portfolio. Accordingly, this article develops a standard framework for investors to blend single-factor and multifactor smart beta within a total portfolio context. A case study demonstrates how the methodology can be applied to attain better portfolios.TOPICS: Analysis of individual factors/risk premia, portfolio construction