A quick excerpt:
Some say smart beta is a gimmick and you cannot improve on a cap-weighted index. Are there inherent flaws in cap-weighted indexes or areas for improvement that can be addressed through smart beta strategies?
I wouldn’t say that there are flaws with cap-weighted indices. In fact, most investors could do far worse than parking their money in a low cost, cap-weighted index fund.
With that being said, we think that it is important to understand that by holding a cap-weighted index fund, investors are implicitly endorsing the market’s valuation of each security. If the market decides that the tech sector should be valued by clicks or page views instead of more traditional fundamentals, the cap-weighted investor goes along for the ride. The dot-com bubble exemplifies the pain that this type of approach can cause.
You can read more here.