Scientific Beta

Among the highlights of the February 2014 monthly performance report for the ERI Scientific Beta indices, over the latest one-year period, the best performing index was the SciBeta United Kingdom High-Momentum Maximum Decorrelation Index, with a relative return of +22.70% 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 February 2014 monthly performance report for the ERI Scientific Beta indices: 

• Over the latest one-year period, the best performing index was the SciBeta United Kingdom High-Momentum Maximum Decorrelation Index, with a relative return of +22.70% compared to the broad UK cap-weighted index.
  
  
• Over the long term, all diversified multi-strategy indices exhibit a positive relative return compared to cap-weighted indices. Performance for multistrategy smart beta indices exposed to risk factors known to be well rewarded over long periods remains strong with annual excess performance over broad cap-weighted indices ranging from 1.54% to 3.00% since inception for the Developed universe.
  
  
• This month, the best performing index among smart factor indices is the Small Cap index with a relative return of 1.00%, closely followed by the High Volatility index with a relative return of 0.96%, while the Large-Cap index and the High Dividend Yield index post the lowest relative returns (0.00% and 0.01% respectively), compared to a broad cap-weighted index; the smart factor Value (book-to-market) index returned 0.74%; the smart factor Low Volatility index returned 0.28%; and the smart factor High Momentum index returned 0.72%.