Smart Beta products do not usually involve as many active investment decisions as pure active management, but they are slightly more complex than market-weighted passive products. This is reflected in the typical cost for these strategies, which tends to be in the middle between active and passive strategies.
The other portfolios on the Covestor platform are managed by third-party investment advisers or hedge fund managers. These portfolio managers fund and trade a proprietary manager-owned brokerage account. In contrast, for each Covestor Smart Beta portfolio, Covestor funds and trades a proprietary Covestor-owned brokerage account. In both cases, each trade made by the portfolio manager (or Covestor) is automatically replicated in clients’ brokerage accounts based on which portfolios the clients have selected to invest in.
These features make these portfolios suitable for a client that desires exposure to the broad stock market but is not sure which portfolio to pick.