Scientific Beta

The objective of this paper is to describe the main features of the Scientific Beta Equity Universe and introduce the key steps in its construction methodology. It is used as the underlying universe for all Scientific Beta’s smart benchmarks, including the Scientific Beta Cap-Weighted Reference Index. The definition and construction of a clear, complete and investible universe are key steps in equity portfolio construction and in equity indexing. In order to create a modular, investible and liquid global equity universe, Scientific Beta has paid particular attention to the design of a straightforward, systematic and transparent methodology for index construction and maintenance.

The objective of this paper is to describe the main features of the Scientific Beta Equity Universe and introduce the key steps in its construction methodology. It is used as the underlying universe for all Scientific Beta’s smart benchmarks, including the Scientific Beta Cap-Weighted Reference Index. The definition and construction of a clear, complete and investible universe are key steps in equity portfolio construction and in equity indexing. In order to create a modular, investible and liquid global equity universe, Scientific Beta has paid particular attention to the design of a straightforward, systematic and transparent methodology for index construction and maintenance. Scientific Beta constructs its different smart beta indices by applying choices concerning geographic selection, stock selection, weighting schemes and risk control mechanisms to this common universe underlying all its indices.

This design methodology works to the advantage of the investor. Ensuring that the Scientific Beta Equity Universe is highly investible ultimately leads to lower transaction costs and furthermore means that any international investors will be able to gain exposure to the underlying securities domiciled elsewhere without taking on additional financial or transactional risks.

In the first section, the main features of the Equity Universe are discussed, followed by a break-down of the geographic and sector segments of the universe in Section 2. The construction and maintenance rules of the Scientific Beta Equity Universes are described in Section 3. Finally, future investment possibilities that will be offered by Scientific Beta are introduced in Section 4.