In the face of recent volatility concerns smart beta should be viewed in a strategic context, according to a recent report by research and consulting firm, Cerulli. According to the report, sponsors will need to work much harder to convince investors and advisors that smart beta strategies are worth including in portfolios.

Low or minimum-volatility products are the primary source of current concerns, “The basic goal of these strategies is to limit losses on the downside, while capturing a decent chunk of the upside," says Barbara Wall, Europe managing director at Cerulli.

"For a long time, the products did exactly that. But in the second half of 2016, it all started to go wrong, with a raft of statistic showing that so-called 'min-vol' products had higher volatility than the mainstream indices over long periods," says Wall.

However, the report notes that low volatility strategies have worked in the long run, and that the recent bad run may be merely an aberration.

“As the old cliché goes, markets don't go up in straight lines. Gaining from smart beta's outperformance may take patience. Smart beta will not work every time. But if it can work at least some of the time, it can help enhance returns, and should continue to play a part in the portfolios of investors, especially those with realistic expectations," says Wall.