I was reading an article on improving the return of your portfolio which mentioned an "anti-beta" fund which I was not familiar with so I tried to do a bit of research. I found the U.S. Market Neutral Anti-Beta Fund and while I understand in principle what it is doing, I do not understand this statement:
Potential to generate positive returns regardless of the direction of the general market, so long as low beta stocks outperform high beta stocks.
My understanding is that by definition beta refers to the volatility of the stock, and in general if the market goes up by 1% a stock with a beta of 2 would tend to go up 2%, while if the market goes does by 1% then the stock with a beta of 2 would tend to go down 2%. Neither of these of course are absolutes, but just statistically and this would go into the process of calculating beta.
So my question is, how can this fund strategy possibly work? It seems that in general high beta stocks would tend to outperform low beta stocks in a rising market, while the reverse would be true in a falling market. So saying that there is the potential to generate positive returns regardless of the general direction of the market would seem to be impossible in general statistical terms and if this actually happened it would seem to me this would cause the betas of those stocks to change and a recalculation of such would result in a new set of stocks for which the premise would be false again. In other words, the potential to generate positive returns regardless of the direction of the general market would only be possible if the beta of the stocks diverged from the value calculated to constitute the portfolio.
Am I missing something here? This product seems like nothing more than a fancy hedge against a falling market, and not something that really should be expected to generate positive returns in a rising market, except by accident.