Scientific Beta

This supplement is dedicated to the theme of smart beta, firstly showing that it is possible to reconcile environmental and financial objectives using low carbon indices, before going on to discuss defensive solutions and indices, and finally looking at the live performance of Scientific Beta Multi-Beta Multi-Strategy indices.

This supplement is dedicated to the theme of smart beta.

A first article shows that it is possible to reconcile environmental and financial objectives using low carbon indices. While these indices achieve an environmental objective by excluding high carbon stocks, and thus putting pressure on high polluting companies to reform, they achieve a financial objective by retaining exposure to rewarded risk factors and by maintaining a high level of diversification.

A series of three articles on the subject of defensive solutions and indices starts by looking at the concepts underlying low risk equity strategies and the distinction between exposure to a defensive strategy and benefitting from the reward to the low risk factor. We then introduce alternative approaches to limiting concentration in minimum and low volatility strategies. Finally, we introduce solutions which rely on a risk-based allocation model to dynamically allocate to smart factor indices carrying long-term risk premia, with a view to delivering a dissymmetric defensive profile.

A final article looks at the live performance of Scientific Beta Multi-Beta Multi-Strategy indices. Live performance does not benefit from hindsight in the way that back-tests potentially can, so the key question for investors is not back-tested performance, but the live performance they will ultimately experience when adopting indices.