Tesla Going in S&P 500 Is What the Smart-Beta Geeks Warned About
- Gauge’s deletions beat megacap additions by 24% in next year
- Tesla is ‘beautiful illustration’ of indexing flaws: Arnott
Photographer: Daniel Acker/Getty Images
This article is for subscribers only.
Concerned that Tesla Inc. may prove to be a drag on the S&P 500 when it enters the index after such a gigantic rally? You’re not alone. There’s a group of Wall Street data nerds who have been making a similar case against traditional stock benchmarks for years.
Some of them are quants who fly the flag of “smart beta,” that hybrid of active and passive management that holds among other things that indexes weighted by market value suffer by chaining their fortunes to big and bloated companies. Tesla’s imminent entry into the S&P 500 is stirring their passions by framing the debate in particularly stark terms.