Scientific Beta

Among the highlights of the December 2013 monthly performance report for the ERI Scientific Beta indices, the best performing index over the latest one-year period was the SciBeta United Kingdom Mid-Liquidity Maximum Deconcentration Index, with a relative return of +11.18% compared to the broad UK cap-weighted index.

Recent years have seen the development of numerous smart beta indices whose weighting schemes depart from those of cap-weighted indices. Smart beta indices may be obtained by tilting economic factors, such as book-to-market, size or volatility, or by introducing greater diversification into the index, as illustrated in deconcentration indices. The positive performance of smart beta indices over the long-term has been largely documented in the literature. However, these indices are exposed to risk factors that differ from those of cap-weighted indices and that may cause variations in performance over short periods. As a result, the presentation of long-term performance is not enough for investors, who are also demanding performance figures over recent and shorter periods. The present report gives a complete picture of smart beta index performance with both long-term and short-term figures that illustrate the variations in performance over the different time periods, as well as the variations in performance between the various strategies. As a result, combining the various smart beta strategies makes it possible to obtain more robust performance.

Among the highlights of the December 2013 monthly performance report for the ERI Scientific Beta indices: 

• Over the latest one-year period, the best performing index was the SciBeta United Kingdom Mid-Liquidity Maximum Deconcentration Index, with a relative return of +11.18% compared to the broad UK cap-weighted index.

• Over the long term, all diversified multistrategy indices exhibit a positive relative return compared to cap-weighted indices, whether they are broad or tilted cap-weighted indices. The highest performances relative to broad cap-weighted indices are posted by the small-cap index and the high book-to-market (value) index (+2.76% and +2.71%, respectively).
  
  
• For the year 2013, the Diversified Multistrategy Index for all stocks produced an absolute return of +27.46% and a relative return compared to a broad cap-weighted index of +0.66%.
  
  
• For the past month, the best relative return compared to a broad cap-weighted index was provided by the Diversified Multistrategy Index with a High Volatility stock selection with a return of +0.61%. For the year to December 2013, this index had a relative return of +6.17%.