Alternative Betas

February 2025

Market capitalization weighted indices have historically been the most widely used strategies to achieve passive exposure to equity markets or capture equity beta. However, there are also strategies called alternative betas that aim to provide a passive, systematic exposure to alternative sources of equity returns, or equity factors.

While alternative index methodologies for investing in other asset classes exist, this paper examines equity indices that have seen broader adoption among institutional investors. It focuses on equity indices, rather than the underlying factors, given that many investors choose to maintain their exposure to equity markets while implementing that exposure in a manner they hope will outperform equities in the long run.