In our paper — “How Can ‘Smart Beta’ Go Horribly Wrong?” — we show, using U.S. data, that the relative valuation of a strategy (in comparison with its own historical norms) is correlated with the strategy’s subsequent return at a five-year horizon. The high past performance of many of the increasingly popular factor tilt and so-called smart beta2 strategies came, in large measure, from rising valuations. These excess returns are an “alpha mirage” attributable to the strategies’ becoming more expensive relative to the market. Even the statistical significance of past performance was an illusion driven by rising relative valuation levels! Today, only the value category shows some degree of relative cheapness, precisely because its recent performance has been weak. Over the past half-century, almost all of the eight factors and eight smart beta strategies we study exhibit a negative relationship between starting valuation and subsequent five-year performance. Today, valuations of many of the most popular factors and smart beta strategies are well above their historical norms, forecasting lower future returns. Our findings are robust for both factors and smart beta strategies across horizons out to five years, using both a simple price-to-book ratio and an aggregate valuation measure, in U.S., developed ex U.S., and emerging markets.