Scientific Beta

The availability of an increasing variety of Smart Beta equity strategies is good news for investors, but only if they can make a fully informed choice from among these alternatives. The Scientific Beta platform provides rich analytics on the results of different strategies in terms of performance and risks. These advanced analytics help investors develop a clear understanding on how the different parts of the portfolio construction methodology influence the overall investment outcome. Moreover, the information conveyed by the analytics can assist investors in making comparisons across different Smart Beta indices. This paper describes the analytics that are available on our platform and illustrates how they can be used to assess the performance of an array of single-factor and multi-factor indices.

The availability of an increasing variety of Smart Beta equity strategies is good news for investors, but only if they can make a fully informed choice from among these alternatives. The Scientific Beta platform provides rich analytics on the results of different strategies in terms of performance and risks. These advanced analytics help investors develop a clear understanding on how the different parts of the portfolio construction methodology influence the overall investment outcome. Moreover, the information conveyed by the analytics can assist investors in making comparisons across different Smart Beta indices. This paper describes the analytics that are available on our platform and illustrates how they can be used to assess the performance of an array of single-factor and multi-factor indices.

Our platform offers different types of analytics. “Standard” analytics correspond to what we consider as the basic reporting requirements for Smart Beta indices. Those statistics are available free of charge and include an Index Overview, Latest Performances, Annual Performances, Performance and Risk Statistics, Risk Analysis, Robustness Analysis, Top-Holdings Analysis, Weight Profile Analysis and Allocation Analysis for multi-factor strategies.

Scientific Beta provides additional tools that help to explain the performance of smart factor indices, and gain an insight into different portfolio characteristics. The “Performance Attribution” provides CAPM Analysis, Fama-French Analysis, Carhart Analysis, Risk Factor Exposure, Sector Performance Attribution, Country Performance Attribution and Component Performances.

In addition, Scientific Beta “Advanced” analytics provide insights into Diversification, Fundamentals, Extreme Risk Analysis, Relative Factor Score Analysis, Conditional Analysis such as performance statistics in bull/bear markets or high/low volatility markets, Turnover and Capacity Analysis, Transaction Cost analysis, Sector-, Country- and Currency Allocation and Currency Hedging Analysis.

In this document, we use the aforementioned analytics to demonstrate the capabilities of seven Scientific Beta indices. These comprise six US single-factor indices (Mid Cap, Value, High Momentum, Low Volatility, High Profitability and Low Investment iHFI Diversified Multi-Strategy) and the Scientific Beta US iHFI Diversified Multi-Beta Multi-Strategy Six-Factor EW index.