Are Alphas Becoming Smart Betas?

Smart beta has become one of the most popular investment terms in the industry as a Google search for the term pops up 43.5 million results. However, what is smart beta? To begin, we need to define what alpha is. Generally, investors casually refer to alpha, or value add/excess returns, as the return generated from active investment management. Alpha is defined as the difference in return between an actively managed portfolio and a passively management portfolio or benchmark such as the S&P/TSX Composite Index.