MarketWatch reports that Rob Arnott, chairman of Research Affiliates, says that smart beta has now become so popular that it is dangerous. Arnott, whose research helped to fuel interest in smart beta funds, says that a “smart-beta crash” is “reasonably likely.” Smart beta funds have focused on stocks with characteristics such as low volatility or high momentum, spurred on by data showing that such strategies would have yielded high returns if employed historically. Now, however, proliferation of investment strategies based on this research has increased prices of relevant stocks significantly due to heightened demand. MarketWatch states that, worse, people “then start factoring that extra [price] bump in valuations into their forecasts for the future” and, therefore, “get even more bullish while they should be getting bearish.” Unlike smart beta stocks, Arnott says, the traditional value approach to investing is “in its cheapest decile in history.” Whether the cheapness is due to growth’s outperformance over value in recent years, the rise in smart beta, or other factors, value seems to be the direction that Arnott suggests investors should be moving.