Scientific Beta

Among the highlights of the November 2013 monthly performance report for the ERI Scientific Beta indices, the relative return of the Diversified Multistrategy Index for all stocks compared to the cap-weighted reference index using long-term US data (more than 40 years) is +2.31% annually.

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.

• The relative return of the Diversified Multistrategy Index for all stocks compared to the cap-weighted reference index using long-term US data (more than 40 years) is +2.31% annually.
  
  
• None of the Diversified Multistrategy Indices, which represent the most diversified versions of smart factor indices, for the Developed universe outperformed the cap-weighted reference index over the past month, with the best performer being the Low Dividend Yield index, which had a relative return of -0.14%.
  
  
• Since the beginning of the year, High Volatility has been outperforming, with the High Volatility Diversified Multistrategy Index for the Developed universe returning +5.28% year-to-date relative to the cap-weighted reference index.
  
  
• The best performing index over the past year is SciBeta Japan High-Volatility Maximum Deconcentration (5% TE/CW) with a relative return of +14.44%.