Overview: How to Reconcile Single Smart Factor Indices with Strong Factor Intensity

Scientific Beta offers investors single smart-factor indices as long-only or long/short indices. The indices are constructed consistently and seek robustness at all stages of the construction process. We describe these indices and explain how institutional investors can use them as part of a portfolio completeness approach.

 
Scientific Beta offers investors single smart-factor indices as long-only or long/short indices. The indices are constructed consistently and seek robustness at all stages of the construction process and offer:

 

• Good factor exposure to the desired factor tilt through exposure to academically validated risk factors;
• Good factor deconcentration meaning that they are not only exposed to their desired factor tilt but also to other rewarded risk factors that improve their absolute robustness. Indeed, they will be less impacted in bear periods of the desired factor tilt;
• High risk-adjusted performance over the long-term through the diversification of unrewarded risks; and
• Risk control options that enable exposure to hidden risks such as geographic, sector or market-beta-gap risks to be reduced.

We describe these indices and explain how institutional investors can use them as part of a portfolio completeness approach.