Scientific Beta

Asset managers and index providers are increasingly touting the benefits of quality investing. Such strategies tilt portfolios to "high quality" stocks, as characterised for example by high profitability, stable earnings or low leverage, which are some of the variables used in practice. However, asset managers and index providers do not use a common definition of "quality," and a large variety of approaches exist. For academics and defenders of a beta, rather than an alpha approach, which is, in our view, the only one compatible with index investment, "quality" refers to a whole new dimension: the factor approach. It is not about finding quality stocks that are possibly undervalued but about being exposed to stocks that present particular risk profiles that are well-rewarded in the long run.

Overview

Asset managers and index providers are increasingly touting the benefits of quality investing. Such strategies tilt portfolios to "high quality" stocks, as characterised for example by high profitability, stable earnings or low leverage, which are some of the variables used in practice. However, asset managers and index providers do not use a common definition of "quality," and a large variety of approaches exist.

For academics and defenders of a beta, rather than an alpha approach, which is, in our view, the only one compatible with index investment, "quality" refers to a whole new dimension: the factor approach. It is not about finding quality stocks that are possibly undervalued but about being exposed to stocks that present particular risk profiles that are well-rewarded in the long run.

This concept was addressed at the webinar, which examined the following questions:

• What does Quality Investing mean? Why is Scientific Beta introducing a new way of investing in quality? What are the limitations of the current approach?
• If Quality investing really does boil down to exposure to more than one systematic risk factor how are these factors defined and what exactly is the economic rationale behind them?
• Is there too much overlap between Value, Low Investment and High Profitability?
• To what extent can these factor premia be delivered in practice and how can you ensure that the resultant factors are investable?
• Which factors are underlying investing in quality? Which one is recommended?
• Is the factor-based approach indeed superior to what other index providers currently offer?

Host

The webinar was hosted by Eric Shirbini, Global Product Specialist at ERI Scientific Beta. Prior to joining EDHEC-Risk Institute, Eric Shirbini was a quantitative analyst at UBS, BNP Paribas and Nomura International. During this time he worked on a diverse range of topics including multi-factor models, fundamental stock valuation, equity market indices, portfolio construction and portfolio trading. At BNP Paribas Eric managed a team of analysts who were responsible for the Global Equity Research Database. Mr. Shirbini holds a BSc and PhD from University College London and an MBA from CASS Business School.

Date/Time

21 September, 2015 at 3.00pm CET / 9.00am EST.